The effects of the war in Ukraine are already being felt in the European economy. Also in Spain, for whom the European Commission significantly lowered its growth forecast on Monday to 4% in 2022, 1.6 points less than previously estimated. Likewise, inflation, triggered above all by energy prices, will close with 6.3% this year, according to the Commission.
The Community Executive presented its economic forecasts, the first since the war broke out, and although it lowered Spain's growth by 1.6 points compared to February, it confirmed that the country will be among the fastest growing in the eurozone, after Portugal, Ireland and Malta. By 2023, he estimates that it will drop to 3.4%. Spain will continue to be among the countries with the highest growth and thanks to this it will finally recover its pre-pandemic levels. Brussels forecasts vary slightly from those of the Government, which projects 4.3% for 2022 and 3.5% for 2023.
According to the Commission, the engines of Spanish growth will be the recovery funds, as well as tourism, which is expected to definitively leave behind the two years of the pandemic, and the improvement in consumption, helped by the end of the restrictions. “Spain is expected to maintain strong growth this year, although the momentum should soften markedly in the second quarter. The investments of the Recovery and Resilience Fund and the recovery of tourism will support growth”, assured the European Commissioner for the Economy, Paolo Gentiloni.
In spite of everything, inflation will continue to be one of the main economic markers that will have to be closely watched. Brussels warns that inflation will remain high in Spain. The EU practically doubles its previous forecast by pointing to a 6.3% increase in prices in 2022 and a moderation to 1.8% in 2023. After reaching the peak this year, Brussels believes that inflation will gradually reduce , in part, due to the "help" of the Government's measures, such as the discount on fuel or the cap on the price of gas, after the agreement signed by Spain and Portugal with the Commission.
According to Gentiloni, inflation will reach its peak in mid-2022, an increase produced so far by prices, especially energy. The Community Executive points out that this increase has been much more pronounced in Spain than in the rest of the eurozone countries, which may have consequences in sectors such as transport or construction. But it can also cause a reduction in consumption, affecting, above all, the most vulnerable households. Likewise, the debt will also be progressively reduced, going from 115.1% of GDP in 2022 to 113.7% in 2023. Less positive are the forecasts in the European Union and the eurozone as a whole, which They point to a reduction in growth to 2.7% of GDP in 2022 and to 2.3% in 2023, almost half of what was forecast in February.
The European Commission rules out a recession, and all economies will close higher this year and next. According to Brussels, the positive effects of the reopening and the end of the restrictions, as well as the measures taken, including the recovery funds, will help weather the storm. Despite this, inflation will remain high. "The war has caused an increase in energy prices, as well as greater disruptions in supply chains, which confirms that inflation is going to stay high for longer," Gentiloni said. Without triumphalism: "We are far from a normal situation," warned the Italian. In fact, the commissioner warned that in the event of a total and sudden cut off of gas from Russia, the eurozone economy would sink, enter a recession and trigger inflation above 9%. Gentiloni recalled that in this more pessimistic scenario, the countries most dependent on Russian fossil fuels, such as Germany, would be affected, although he did not mention it.
This scenario would cause disruptions, accentuated by high oil and gas prices, so the deterioration would be "substantial". In addition, it would be harassed by the "limited possibilities" that exist in the short term to replace Russian gas with liquefied natural gas, since specific infrastructures are needed; and the difficulties of countries like the United States or Qatar to increase their exports "quickly enough" to compensate for the cut.