The European Commission lowers the growth forecast for Spain to 4.6%

The European Commission estimates that Spanish economy will grow 4.6% in 2021, which represents a cut of 1.6 percentage points compared to the estimate made in July, while the increase in the price level at the end of this year will be 2.8%.

The new update of the economic forecasts of the Community Executive also point to an expansion of Spain’s GDP of 5.5% in 2022, to later reduce its growth to 4.4% a year later.

These data contrast with those of the Government of Spain, which in its latest macroeconomic table contemplates a rise in GDP of 6.5% this year and an expansion that reaches 7% a year later.

With the Brussels calculations, Spain will be the last of the four major euro economies to regain its pre-crisis level of GDP: it will not do so until the first quarter of 2023, while Germany, France and Italy will do so before end 2022.

These forecasts are part of a scenario of price growth, which will stand at 2.8% this year due to the rebound in gas and electricity. The energy prices, argues Brussels, will remain at “record levels” until the second quarter of 2022 and to these adds the upward pressure that the updating pensions with the CPI.

However, the economic services of the Community Executive consider that the slowness in the recovery of employment “should help to contain wages and limit” an upward spiral of prices. Therefore, it foresees a downward path of inflation from this year, to 2.1% in 2022 and 0.7% in 2023.

Downside risks

The European Commission emphasizes that service sector is “finally” supporting the Spanish recovery and stresses that private consumption will continue to be “strong” thanks to the “boost” of savings accumulated during the pandemic and job creation.

However, although the uncertainty “has been significantly reduced thanks to the control of the health situation at the national level “, the Community Executive warns of the existence of” various risks “for the future.

Among them he cites the “persistence or resurgence” of the disease in other countries, which may affect economic growth through a less tourism to Spain. But it also highlights that the “bottlenecks” on the supply side, as well as the energy and transport prices may “delay” recovery in the short term.

On the positive side, the Commission stresses that the recovery plan will “gain traction” in the coming months, increasing both public and private investment. However, it warns that “mismatches” in the labor market can have a negative effect on the investments planned for the ecological and digital transitions.

Forecasts for the euro area

The European Commission has revised up its economic growth forecasts for the European Union and the euro area during 2021 on Thursday and has predicted that the gross domestic product (GDP) in both areas will advance by 5%.

However, for 2022 he has worsened his estimates and predicted an economic growth of 4.3% in both the nineteen countries that share the euro and in the Twenty-seven.

As for inflation, Brussels expects it to stand at 2.4% this year and 2.2% in 2022 in the eurozone, while in the EU it will be 2.6% and 2.5%, respectively.

In its previous forecasts, published in July, the Community Executive had anticipated an increase in GDP of 4.8% in the community club and the countries of the single currency during 2021, while for 2022 it expected an advance of 4.5% in the two spaces.

The estimates published today by the European Commission also contemplate economic growth in 2023 of 2.4% in the euro partners and 2.5% in the Twenty-seven.

Brussels has assured in a statement that the economy is recovering from the recession caused by the coronavirus “faster than expected”, but has admitted that its forecasts depend “to a great extent” on the evolution of the pandemic and the rate at which supply adjusts to the “rapid change in trend in demand after the economy reopens.”