Economic growth forecasts continue to decline

Economic growth forecasts continue to decline

After the GDP for the first quarter was lower than expected (+0.3%), the Savings Banks Foundation has raised the inflation rate and revised down its growth estimate for this year. Out of a total of 19 panelists consulted by Funcas, 15 have worsened their forecasts and believe that 2022 will close with the economy growing by 4.3%.

The downward forecast is mainly due to the weakness of domestic demand, which will persist next year.

According to Funcas experts, national demand will contribute 3.3 percentage points, eight tenths less than forecast in March, “with a sharp downward revision of public and private consumption and investmentin the latter, especially in the construction branch”. The foreign sector will add one point to GDPwhich represents an improvement of three tenths due to the reduction in the expected growth of imports.

“The prospects for recovery are clouded both in Spain and in the rest of the main countries due to the intensification of uncertainties throughout the world. Geopolitical and supply shocks aggravate inflationary pressures, leading to a tightening of monetary policy, with the consequent impact on demand”, they explain.

By 2023 they expect GDP growth to stand at 3%, “which would mean a slowdown of 1.3 points as a result of the weakening of the contribution of national demand and, above all, due to the null contribution of the foreign sector ”.

As for the labor market, they state that the pace of employment growth “will slow down.” For this year, the average estimate has been reduced by six tenths, to 2.9%, while the forecast for 2023 stands at 1.9%. As for the unemployment rate, “it will continue to fall” to 13.7% in 2022 –two tenths less than in the previous Panel– and to 13.2% in 2023.

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Inflation soared, but down

The Consumer Price Index (CPI) fell by 0.2% in April, placing the inflation rate at 8.3%, that is, 1.5 points less than in March. However, the core rate (headline index excluding unprocessed food and energy products) rose one percentage point to 4.4%, while core inflation, which excludes all food and energy products, rose to 3.3%. .

Fulfilling what Funcas anticipated, inflation reached its ceiling in March and in April began to fall due to the drop in energy products (drop in electricity and fuel).

Although energy products are falling, experts warn that “inflation in the rest of the CPI components continues to rise, due to the intensification of the transfer to final consumer prices of the increase in production costs. Thus, in April, “the number of CPI subclasses with an inflation rate above 4% was 106, compared to 94 the previous month and 14 in April 2021.”

Due to inflationary tensions, the average inflation forecast for this year has been revised upwards by 1.5 percentage points, that is, up to 6.9%. “In the coming months it would drop until ending with an interannual rate in December of 4.3%” and for 2023, the panelists foresee a moderation to an average annual rate of 2.2%.

More information on economic forecasts

-Funcas lowers the GDP growth forecast by almost a point and a half

-The IMF worsens forecasts for Europe but rules out recession

-Inflation will begin to fall this month, predicts Funcas

Inflation, a global problem

According to reports from the International Monetary Fund (IMF) this year the inflation rate could average 7.4% globally, with emerging and developing economies “the hardest hit,” according to an infographic by Statista. In the most advanced economies it is estimated that inflation would be around 5.7%.


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