The downward correction of the Bank of Spain to its GDP growth forecasts, that follows the reductions of other organizations such as Funcas, leaves the macroeconomic picture with which the Government calculated the Budgets last year in a mere illusion. It’s only been a few months, but nobody talks about economic recovery anymore, but of war and inflation. That, of course, will have an effect on the State accounts, as it is already having on the citizens. In its quarterly report published this Tuesday, the Bank of Spain estimates that the Spanish economy will grow 4.5% this year, nine tenths less than what it calculated in December, before the invasion of Ukraine. The official figures of the Government still remain at 7%, which if I was already optimistic when they were presented, Now they just seem impossible. It is ruled out that the data will be reviewed when the Executive presents the 2022-2025 Stability Plan at the end of this month. In the medium term, the Bank of Spain does not trust to recover the level of activity from before the pandemic until the third quarter of 2023. More than a year to recover the economy.
Of all the known bad data this Tuesday, the most worrying is that of inflation. It will rise to 7.5%, estimates the same report. That, counting the measures that the Government has already adopted to try to contain the escalation of prices, which include everything from fuel rebates to caps on rent increases. But without counting the consequences that may have future sanctions against Russia or the same prolongation of the warlike conflict. The countries of the European Union are showing unity of action since the beginning of the invasion, weakening the Russian economy, but it has already been seen that the sanctions act like a boomerang against Western countries. The atrocities of Bucha and other Ukrainian cities cannot be left without a European response, although that answer is done with a calculator to evaluate the cost-benefit ratio. For example, the difficulty of getting rid of dependence on Russian oil and gas, for some countries (Germany) more than others.
Returning to Spain, all this translates into a single certainty among a sea of doubts: this year the efforts should focus on saving the furniture. It is now that the State must demonstrate its function as a social umbrella, prevent inflation from hit low incomes harder and trigger social inequality. The first set of actions goes in the right direction, but more may be needed. An increase in social spending (only the increase in pensions due to inflation will cost 13,500 million more) that it would be counterproductive to do it only on account of the deficit.