MADRID – The European Commission (EC) on Monday lowered its economic growth forecast for Spain and raised its inflation forecast amid the fallout from the war in Ukraine and rising prices.
Brussels’ growth forecast for Spain for 2022 is down 1.6 points to 4%. The EC also lowers its growth forecast for 2023 by one point to 2.7%. Furthermore, the EC will double inflation to 6.3% in 2022. Moreover, not only will Spain’s growth forecast fall, but the entire eurozone will also have to believe it. That growth forecast has been lowered to 2.7% and the average inflation rate for Europe is estimated at 6.1%.
Spain fourth EU country in growth
With the forecast revised down, Spain’s economy will be fourth in growth in the EU as a whole this year. Furthermore, it will be surpassed only by Ireland, Malta, and Portugal, the countries with the highest growth.
Moreover, the progress of the Spanish GDP forecast by Brussels is slightly lower than that forecast by the Spanish government. It calculates an increase of 4.3% for this year and 3.5% for next year.
Despite disruptions, the economic recovery continues
“The economic recovery is expected to continue in Spain, despite the disruptions caused by the Russian war of aggression against Ukraine. Investments from the recovery and resilience plan and the recovery of the tourism sector are expected to support economic growth,” it said. To the Commission’s report. According to Brussels forecasts, the labor market will remain “strong”, bringing the unemployment rate to Spain at 13.4% to its lowest level since 2008.
See also: Unemployment in Spain is a big exception within Europe
Tourism as the engine of the economy
On the other hand, the committee emphasises that tourism has been the engine of the Spanish economy since the summer of 2021 and that economic growth will accelerate from the third quarter of 2022. This is done based on the investments that can be made from the EU’s Recovery Fund. This will lead to a recovery in consumption, which in turn will be stimulated by the recovery of the labor market and the savings resulting from the pandemic.
EC doubles inflation forecast
Brussels has doubled its inflation forecast for 2022 to 6.3%. That figure is slightly above the eurozone average (6.1%) and lower than the EU as a whole (6.8%).
Inflation peak expected in mid-2022
“Inflation is expected to peak in mid-2022 and will average 6.3% in 2022,” the EC said in its analysis. In it, the institution points to a deterioration in the purchasing power of Spaniards as a result of price increases. As a result, consumption will remain at levels still below pre-pandemic levels.
Energy prices rose faster in Spain than in other euro countries
Brussels points out that the rise in energy prices in Spain has been faster than in other eurozone countries. This has consequences in sectors such as transport, construction, or the electro-intensive industry. At the same time, it has consequences for private consumption.
Furthermore, Brussels estimates that employment growth in Spain will be 2.8% in 2022 and 1.1% in 2023. That is above the level of the community average and the Eurozone, which are estimated at 1.2% for 2022 and 0, respectively. 7% for 2023.
Risks to the European economy
In any case, the EC warns that the “risks” to the European economy are “hugely dependent” on the evolution of the war and “mainly” on its impact on energy markets.
Even more serious scenario
The Brussels analysis includes a much more serious scenario. This is not only characterized by energy prices that are even higher than expected, but also by a “complete cut” in gas supplies from Russia. These affect all GDP growth in the eurozone, as it would therefore contract to 0.2% this year and cause inflation above 9%.