2023-04-28 20:38:01
Neither inflation nor the rise in rates will slow down the Spanish economy, according to the forecasts that the Government has sent to the European Commission this Friday in its stability plan. Some plans that expect an improvement in the labor market that will make it return to a situation similar to the one experienced before the 2008 bubble burst. The Executive anticipates to Brussels that Spain will be able to recover the unemployment rate of 10% within three years, in 2026.
It is a reference that the economy has not seen for 15 years, when it was in full expansion of real estate. Only once in history has Spain had a lower unemployment rate, in 2007, with 7.9%. At that time, there were 20.7 million employed and just over two million unemployed, with which it was considered that the desired ‘full employment’ existed.
This new labor calculation by Moncloa is based on the expected incorporation of 1.1 million more employed persons until 2026, with an average of some 400,000 more each year. Economy reminds the EU that this figure adds “to the million jobs created after the pandemic” and that, according to the forecasts of the Ministry led by Nadia Calviño, “it will allow record levels of employment to be reached.” And he insists that Spain will achieve it with an “increase in the active population and an improvement in the quality of employment.”
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These new forecasts come with recently published data from the EPA (Active Population Survey) for the first quarter, which shows a slight drop in employment that is unusual for this period, which is usually historically damaging to the economy. At the end of March, the unemployment rate stood at 13.2%, although the goal is to close this year at 12.2%. To compare with other calculations, the Bank of Spain raises it to 12.7% and expected to reach 12% in 2025.
In the case of structural unemployment, which is linked to inflation close to the ECB’s target and does not depend on bullish or bearish economic cycles, it is set at around 9%. In this way, the commitment goes through “convergence at the European level,” the document indicates.
The readjustment of the prospects of the Spanish economy for a “structural change” on which the Government insists on pointing out throughout the document. Also in the field of temporality, which plans to continue reducing in the coming years. Until the first quarter of 2023, the temporary employment rate was above 17%, although it had already begun the reduction path from more than 30% that Spain had at the end of 2021. Just at that moment the labor reform began which, with the impulse of the figure of the fixed-discontinuous, “is allowing the reduction of temporary employment” in employment, according to the document.
Growth higher than European
The Executive entrusts all its labor calculations to a recovery of the economy that will be more intense than expected so far. Thus, he is confident that GDP will grow this year by 2.1% (after having closed the past at 5.5%), but that in 2024 it will rebound to 2.4%, above the estimates of the rest of the economic organisms.
The new macroeconomic framework foresees that domestic demand will be the main engine of growth this year, and especially private consumption, with an estimated growth forecast of 2.1%, sustained mainly by the evolution of employment.
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These are “prudent” forecasts, according to the ministry led by Nadia Calviño, after the “strong economic growth” of recent years and which continues in the first quarter. However, economic analysis organizations are not so optimistic: the Bank of Spain is the closest to the Government’s calculations, with a forecast of 2.3% for 2024, but the IMF predicts 1.5% and the OECD calculates 1.7%.
Even so, the Government recognizes in the text sent to Brussels that this macroeconomic scenario is framed in an international context marked by the rapid tightening of monetary policies, episodes of financial tension and uncertainty in the geopolitical and energy spheres. In this sense, the Executive ensures that Spain has maintained “solid” economic growth since the end of the pandemic and that in 2023 it will lead GDP growth among the main countries of the euro area for the third consecutive year.
These are calculations based on a stronger than expected first quarter. The Spanish economy advanced 0.5% thanks above all to the boost in exports and investment, according to INE data published yesterday. Despite the slowdown in the last part of last year, the economy is now taking a breather and accelerating to almost recovering the level of GDP prior to the pandemic.
This quarterly advance makes the economy grow by 3.8% year-on-year, nine tenths more than in the last part of 2022. Spain thus once again becomes the country in the euro area that grows the most in this first quarter. The euro powers advanced only 0.1% on average, although they managed to avoid the worst-case scenario: recession.
Despite these good data, it should be noted that household consumption fell by 1.3% compared to the last quarter weighed down by high inflation, the rise in interest rates and the financial crisis, but exports fell by 1.9% and investment 5.8% boosted by European funds. But compared to the first quarter of last year, household consumption grew by 1.5%, still the lowest rate in two years. Given inflation, households spent 6.5% more than in the same period in 2022, but could only buy 1.5% more than then.
The measures mitigated the loss of purchasing power by 20%
On the high inflation -which in April marked 4.1%- they anticipate that the measures adopted -reduction of VAT and taxes on electricity and gas, among others- will facilitate “the gradual return of the CPI to its average level term”, they indicate from Economy.
In fact, they estimate that the set of measures adopted in 2022 -which also includes the bonus of 20 cents per liter of fuel that ended at the end of the year- mitigated the loss of purchasing power by 20% for households as a whole , with a greater impact on those with lower income.
The cost of the set of measures adopted last year amounted to 1.7 points of GDP, some 20,000 million euros and, according to his calculations, allowed the CPI registered in 2022 (8.4%) to be lowered by more than two points, due to without them the inflation rate would have exceeded 10%.
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