The conclusions of the forecasts published today by the Savings Banks Foundation (Funcas) have two sides. On the one hand, they have increased the growth of the Spanish economy by half a point this year, compared to their January calculations, to 1.5%. And also, it will allow you to recover the pre-pandemic level of activity at the end of the year. In this field, Funcas follows the trend of the majority of organizations and institutions with an upward correction of its forecast. But, the not so friendly side is that it also predicts a stagnation of the economy in the second part of the year, with the last two quarters in which GDP will only grow by 0.1% and 0%. This slowdown also continues in 2024, and leads Funcas to reduce the forecast for next year by four tenths, which leaves it at 1.4%.
"We started the year with a good record, but the impact of interest rates and the loss of consumer purchasing power will have its effect in the second half of the year," they point out from the study center. Specifically, they play against the impact of monetary policy, high inflation and the tensions in financial markets that arose after the fall of Silicon Valley Bank. These are factors that will be especially noticeable after the summer, which will weaken economic activity.
These are the factors that slow down activity, while instead those that drive it are the de-escalation of energy prices, the full normalization of tourism and the better rate of execution of European funds.
In this context, it will be domestic demand that will pull the economy the most, thanks in large part to the stimulus provided by European funds. "The Next Generation EU would explain close to half of the expected growth in investment and would contribute four tenths of a point of GDP growth," said Funcas' Director of Economic Affairs, Raymond Torres. The other driver of demand will be public consumption. On the other hand, private consumption will practically not advance. Here the loss of purchasing power of families is noticeable, and also that the cushion of savings accumulated during the pandemic is no longer enough.
On the other hand, Funcas also warns of the high deficit. It is true that the increase in collection caused by inflation and the new taxes will allow the deficit to be reduced, but the cut will be small, up to 4.5% of GDP. The reduction will be halted by the aforementioned slowdown in the economy, the anti-inflation measures, the indexation of pensions and the greater financial charges caused by the rate hikes. Thus, by 2024 it is expected to drop to 4.3%.
"The persistence of a public deficit of more than 4% is a factor of vulnerability, in a context of withdrawal of ECB support both in terms of rates and the purchase of public debt", they point out from Funcas and recall that in 2024 it will foreseeably take place the reactivation of the European fiscal rules, with which there will be less budgetary margin.
