Outlook for the Spanish economy in the face of falling energy prices
Fecha: enero 2023
Raymond Torres and María Jesús Fernández
SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 1 (January 2023)
After upward revisions in the first and second quarter GDP figures, growth in the first half of last year stood at 7.3% year-on-year, up from the initially published 6.7%, while GDP rose just 0.1% in the third quarter of 2022. The combination of labour market resilience and an easing of inflationary pressures arising from lower energy prices, coupled with higher than anticipated natural gas storage levels in Europe, means that the economy is likely to have performed better towards the end of the year than initially thought. Meanwhile, the public deficit continues to beat expectations, once again thanks to higher than forecast tax revenue. As of September, the overall deficit was running at 2.3% of GDP, compared to 6.3% in 9M21. The adjustments made by the National Statistics Office to the initially reported GDP figures, coupled with the let-up in energy prices, have prompted an upward revision to our growth forecasts. In 2022, we are now expecting GDP growth of 5.2%, up 0.7pp from the last forecast, as a result of the new official figures. Growth is expected to fall back to 1% in 2023, mainly because Spanish households no longer have a savings buffer to prop up their consumer spending. With the broader European economy gradually rebounding, growth is forecast at 1.8% in 2024, which would finally put the Spanish economy back at pre-pandemic levels. The government deficit is forecast at 4.3% of GDP in 2023, with public debt at 110%. Those readings should improve in 2024 in tandem with the economic recovery. These forecasts remain subject to a significant level of global uncertainty. But fiscal sustainability will depend on the credibility of the targets set for correcting current imbalances and the transformational nature of the investments financed using the NGEU funds.