The Government had no choice this Friday but to surrender to the evidence and severely downgrade its macroeconomic forecasts. It waited almost until the last moment, when the deadline was running out to deliver the update of the Stability Plan to Brussels, to align itself with what other institutions -including the Bank of Spain itself- were already warning about weeks ago: that a slowdown in Spain’s GDP. Clearly, the 7% growth for 2022 that the Government maintained until two days ago was implausible, so a reduction in macroeconomic projections was taken for granted. Finally, the cut was 2.7 points, up to 4.3% for this year. The Spanish economy would continue to grow, but with less euphoria.
The new forecasts presented by the vice president Nadia Calvino indicate a much less optimistic scenario, and more realistic, with everything that is happening: from the Ukraine war to skyrocketing inflation. They are not good data, but they are not much worse than what neighboring countries forecast. Germany has also lowered its growth forecast this week by 1.6 points, to 2.2%. And the GDP of the eurozone in the first quarter registered a meager growth of 0.2% (in Spain it was 0.3%). It is little consolation, however, that the European economy suffers from a general slowdown.
It is surprising that, in the current context, the Ministry of Economy maintains the forecast of deficit reduction for this year (by 5%) as well as public debt reduction (115.2%). Calviño maintains that it will be possible thanks to the increase in collectionsomething that cannot be ruled out but should be considered with caution, since the State will have to face a increase in pensions (6%) and, given the prolongation of the conflict in Ukraine, the Government may have to extend beyond June the measures of the anti-crisis decree approved this week (to lower electricity, fuel and rents, among others). Added to this is the fact that, between January and March, household consumption fell by 3.7% and that in April inflation, although it moderated, marked a very high 8.4%. Although the minister stressed that the increase in State income will come, not so much from price increases, but from improved employment and economic recovery, the uncertainty about the effects of the war forces us to view any optimistic announcement with reservations. Even after Spain and Portugal have achieved a agreement with Brussels to limit the price of gas to generate electricity, and that according to the Government will lower the electricity bill, which remains to be seen.
Much more likely is the interest rate hike which the European Central Bank (ECB) has been resisting, but which is expected to apply gradually from July. The tightening of monetary policy should reduce inflation, but it will be a added difficulty for those who must pay credits.
However, not everything is cloudy. The European ‘Next Generation’ funds, overshadowed by the war, they move on. The Government will request in the coming weeks 12,000 million euros more from the second tranche, which must be used to improve the economic model. The agility and transparency in the transfers of this money will have an impact on the recovery: not everything is in the hands of Putin.