As the end of the year approaches, the downward revisions of the forecasts for Spain this year. The Organization for Economic Cooperation and Development (OECD) has added to this trend by cutting the estimate for 2021 by 2.3 points, to 4.5%, according to the biannual report ‘Economic Outlook’ published by this body that integrates the most industrialized economies in the world, published this Wednesday. For 2022, the revision is also downward by 1.1 points, to 5.5%.
The bulky GDP downward revision of Spain’s GDP forecasts contrasts with those of the other large countries in the euro zone. The OECD considers that the GDP of the area will grow by 5.2% in 2021 and 4.3% in 2022, which represents a downward revision of one and three tenths respectively compared to previous forecasts.
In the case of Spain, “domestic demand was weaker than expected in the second and third quarters, partly reflecting inflation and the slower-than-estimated deployment of European recovery funds,” explained the senior economist and Head of the OECD for Spain, Müge Adalet McGowan. Spain will not recover the economic level prior to the pandemic until the first quarter of 2023.
Direct aid and tourism
The expert has also attributed the bulky GDP forecast downgrades due to slow disbursement of direct aid to companies and weak tourism performance. Climbing of the iInflation, at a year-on-year rate of 5.6% in November, the highest level in almost 30 years, also contributes to introducing uncertainty on recovery and has fueled disputes over wage increases. According to these projections, the unemployment rate, which was 15.5% in 2020, will drop to 15% this year and 14.2% the next.
With these forecasts, the pressure on the Government to adjust its own is redoubled, the one incorporated in the State Budget project, d6.5% for this year and 7% next year. The Bank of Spain has already announced that this month it will also reduce its, 6.3% and 5.9% next year. Brussels recently plunged the estimates to 4.6% this year and 5.5% next year, as the International Monetary Fund (IMF) has already done or some 20 entities or study services have carried out, according to the panel of Funcas.
By country, Germany will grow 2.9% this year, unchanged, and 4.1% in 2022, half a point less. In the case of France, the OECD has revised the estimate for 2021 up by five tenths to 6.8%, and by two tenths that of 2022, to 4.2%. In the same way, Italy will grow 6.3% this year, four tenths more, and 4.6% next year, five tenths more.
Spurred on by domestic demand
The agency has highlighted that domestic demand will be the main driver of growth due to increased confidence, improved labor market conditions and favorable financing conditions. By 2021, the OECD has placed GDP growth at 5.3%. For 2022, the economic growth forecast has been placed at 3.9%.
“Fiscal policy will be supportive in 2022 and largely neutral in 2023. Improving and adapting workers’ skills, through active employment and adult learning policies, will be key to facilitating an inclusive recovery and collecting the benefits of increased digitization “, has indicated the OECD.
With respect to the rest of macroeconomic data, the OECD estimates that Spain will close 2021 with an unemployment rate of 15%, reducing to 14.2% in 2022 and reaching 13.6% in 2023. On its side, the debt ratio on GDP it will be 120.1% at the end of this year and will stand at 117.1% at the end of 2022. In two years, the ratio will be 115.9%.
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The deficit outlook will continue to improve over the time horizon analyzed. While in 2020 Spain closed the year with a deficit of 11% with respect to GDP, this year it will be reduced to 8.1%. In 2022 the deficit will reach 5.4% and will be reduced again to 4.2% in 2023.
Among the downside risks for the Spanish economy, the OECD has warned of the possibility of a pandemic rebound, a greater persistence of the inflation that is transferred to the final prices and wages and greater permanent effects of unemployment and the business bankruptcies. However, the economy could surprise to the upside if tourism recovers its pre-pandemic levels earlier than expected and if the impact of European funds turns out to be greater than estimated.
Reference-www.elperiodico.com