“Spain will avoid a technical recession [dos trimestres consecutivos de contracción de la actividad económica]”, according to the Bank of America team of economists for Europe, led by Rubén Segura-Cayuela. The US investment bank is one of the first large entities to revise Spain’s growth forecast for 2022 upwards, three tenths, from 4.1% to 4.4%, after the surprise in the second quarter, when our country quadrupled the rate of expansion of the OECD and doubled that of the euro area as a whole, with an increase of 1.1% of GDP (Gross Domestic Product) compared to the previous quarter.
The Bank of Spain rules out a recession “in the immediate horizon”
Bank of America thus recognizes the explosion in demand in the face of the first tourist season without COVID restrictions since 2019, and the boost provided by the stimuli of the pandemic and those that have now been deployed in the face of the impact of the Russian invasion of Ukraine, despite to the blow of inflation originating precisely in the energy crisis exacerbated by the war.
The Harm of Runaway Price Rises and Interest Rate Hikes [como receta del Banco Central Europeo (BCE) para dejar de alimentar la inflación] in consumption and in business activity will be palpable in 2023, in the face of when Bank of America has reduced the GDP growth forecast to 0.7%, 1.7 points below the previous estimate.
“Growth in 2022 picks up because the second quarter was stronger than expected and we anticipate a decent third quarter,” says Rubén Segura-Cayuela. “The last stretch of normalization (especially after what seems to have been a very good tourist season) is helping in the middle part of the year,” he continues.
“And we believe that Spain will manage to avoid a technical recession. However, although it will avoid rationing [de energía] Given the lower dependence on Russian gas, we think that the energy price shock and the persistent uncertainty of supply will weigh on the country, especially given the high sensitivity of the Spanish economy to persistently high prices”, regrets the economist.
“As in the rest of the region, we believe that this will reduce the growth trajectory well into 2024. This greater sensitivity is partly reflected in our inflation forecast for Spain, which is above those of the eurozone in the next two years (9.2% in 2022 and 5.3% in 2023, before falling to 1.1% in 2024)”, he highlights.
Bank of America gives continuity to the vision of the Bank of Spain or the Government, and is supported by data such as industrial activity in August that was known this Thursday, and that showed less weakness in our country than in the rest of the eurozone.
Strong growth in Spain
On Monday, the Organization for Economic Cooperation and Development (OECD) confirmed that Spain almost quadrupled the economic growth of all the countries that comprise it in the second quarter. The institution stated that the GDP (Gross Domestic Product) increased in our country by 1.1% between April and June, compared to the average of 0.3%, always compared to the previous quarter.
The OECD also points out that Germany recovered the level of activity prior to the pandemic at the end of this second quarter, the last economy of the seven largest (the G-7) that had yet to achieve it. Spain has not yet achieved it, and the expectations are that it will not do so until the end of 2023 or the beginning of 2024, after the recovery slowed down due to the inflation crisis and the uncertainty caused by the Russian invasion of Ukraine.
This delay in Spain in rebuilding after the historic COVID shock is explained by the greater weight of the services sector in GDP, and specifically tourism, which precisely this year has experienced its first full high season since the pandemic, without restrictions, with the obstacle of the general rise in prices.
Even so, our country leads the growth estimates for the end of 2022 and 2023, and could be the only major economy in the eurozone to escape the recession, which is already dangerously threatening Germany.