More inflation and less growth. this is the conclusion OECDIn line with other international organizations, in a revision of their economic forecasts published this Wednesday, 1.4 point drop expected to Start of Spain by 2022 4,1%, You go up 5 points launch of inflation mean for the whole year, up to 8.1%.
data for 2023 They are no more encouraging. in fact, in economic outlook Posted this Wednesday GDP also slows down the growth rate until next year 2,2% -up from 3.8% of the previous estimate-, which shows apply brake The economy in which we are immersing ourselves.
,growth will slow down Due to increase by 4.1% in 2022 and up to 2.2% in 2023 Uncertaintythe high inflation and recession external demand“, they acknowledge. They are confident, however, that “household savings accumulated during the pandemic, a fiscal package to mitigate the effects of the war, a sustained recovery of employment and next generation funds will support domestic demand.” Ongoing tourism recovery will also support growth.”
Although in the latest forecasts published in December, the OECD had expected private consumption to grow by 4.5% this year, a rapid rise in prices in the country has almost nullified that expectation: they now estimate a Consumption growth in the country by 0.1%.
In first term of the year, the OECD recalls that “the micron version, high inflation and the war in Ukraine caused a moderation GDP growth rate 0.3%“, with the Spanish economy still far from recovering to pre-Covid levels. “GDP was 3.5% below pre-pandemic levels”“, they confirm.
In the second quarter, for which there is still no official development data, they observe movements of various signs: “Reliance consumers and businesses has gone bad And industry and services activity indicators have slowed since March. Job creation gained momentum Perpetual contracts have increased from about 10% in 2021 to 48% in April and as a proportion of new contracts. The recovery of tourism has accelerated, with foreign tourist spending reaching 84% in March as compared to March 2019.
They deny the government: high inflation in 2023
Furthermore, this body is far less optimistic than the government. value development. In the 2022-2025 Sustainability Program, the executive estimates that GDP deflator -Indicator is used to measure price increase instead of CPI – Average growth this year 4% But will reduce the next 2%, in line with the objective set by the European Central Bank (ECB). However, the OECD believes that GDP deflator will be even higher in 2023 Compared to 2022: They put it at 3.9% this year—in line with official forecasts—but they raise it 4.6% in the next.
According to their calculations, Average CPI this year will be 8.1% and in the next financial year 4.8%but warned that inflation basic -which does not include the price of food and energy- will remain unchanged in: 4,5% Average this year and next year. To avoid second round effects, they ask for an income settlement.
“Inflation is expected to ease in 2023, thanks to continued sluggishness in labor markets and moderate inflation in wages, but The effects of the EU oil embargo on Russia remain high. there is risk about what Inflation consolidated growth If there is a new disturbance in the energy market or a large pass-through to final prices and wages (…), the proportion of agreements with wage indexation clauses remains moderate, but is increasing, indicating Importance of an agreement of social partners To distribute the load and avoid a spiral of wage prices”, he explains.
To date, the proportion of the wage index segment is “low” and wages have increased by 1.3% by the first quarter of 2022, the OECD states, but the scenario must be prevented from worsening. However, he hopes that a deal with Brussels limit the price of gas, He expects it to come into effect in June, which may help control general inflation.
They call for a review of public spending
The OECD reviewed all in its report Expansionary Fiscal Policy Measures that the government has launched for 2022 and 2023, such as fuel rebates, an extension of existing tax cuts in energy matters and direct assistance to the transportation sector and industries with large electricity consumption, a refugee welcome program and a new line for vulnerable companies. loans (10,000 million euros, 0.6% of GDP).
also remember that support measures To reduce the increase in energy costs (6,000 million euros, 0.4% of GDP) ending in June, expected to be extended till septemberand that to compensate for the loss of purchasing power of the introduction of the mechanism pension household income support, but also increase in public spending in the forecast period.
thus, call for fiscal consolidation plan, that the measures focus on the most vulnerable groups, which the IMF recommended on Tuesday, and that Public spending is reviewed.
“Financial support must be well-targeted and temporary to address the short-term effects of the energy crisis on vulnerable households and businesses. fiscal consolidation strategy on a medium term basis spending review to gradually reduce dficit ratio of tax and public debt in GDP”, they insist.
By 2022 they expect the public deficit to drop to 5% (four tenths less than forecast in December) and debt to 115.6% of GDP. For 2023 they project a deficit of 4.2% and a public debt level of 113.1% of GDP.
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