The central Bank of Spain has sounded the alarm about the challenges facing the Spanish economy this year, derived from the rise in energy prices and the uncertainties caused by the war in Ukraine.
"We have doubled the inflation rate (forecast for 2022)," said the new director general of Economy and Statistics of the Bank of Spain, Ángel Gavilán, when presenting the new forecasts of the supervisory body. And in fact, the average inflation estimate for this year has more than doubled, from the 3.5% forecast in December to 7.5% now.
This estimate implies that Spain will continue to be shaken by out-of-control monthly inflation rates between 9% and 10% at least until July. As of that month, the Bank of Spain believes that the rise in prices will begin to moderate.
In other words, Spanish residents should keep in mind that at least another three months of sharp price increases await them.
Starting in the third quarter of the year, prices should begin to moderate gradually, until they return to acceptable levels of between 2% and 3% in 2023 and 2024.
But the bad news for the Spanish economy does not only have to do with inflation. The new forecasts by the central Bank of Spain also include a significant reduction in growth forecasts for the Spanish economy as a result of the Russian invasion of Ukraine.
The Bank of Spain estimates that the Spanish economy will grow by 4.5% in 2022, which is 0.9% less than previously estimated. For 2023, the new growth forecast is 2.9%, one point less than the previous forecast. It only improves the forecast for 2024. For that year, the Bank of Spain estimates that the Spanish economy will grow by 2.5%, 0.7 points more than estimated in December.
The main reason for lowering the growth forecast is lower private consumption. The Bank of Spain predicts that households will slow down their consumption due to high inflation and general economic uncertainty.
The agency's forecasts have been backed by some private economic analysts, such as Funcas and BBVA.