By Jesus Aguado and Emma Pinedo
MADRID (Reuters) – Spain’s economy could grow by around 4% in 2022, half a percentage point less than forecast in April, as rising inflation hurts consumer confidence and the international trade is slowing down, the Bank of Spain announced on Wednesday.
The envisaged lower growth rate would bring it in line with this week’s downward revision by the European Commission. He had previously forecast a 5.6% rise in GDP for Spain.
In April, Spain’s central bank had already downgraded its economic growth outlook for this year and next due to the impact of inflation fueled by Russia’s invasion of Ukraine and forecast inflation to rise. to 7.5% in 2022.
Prices rose 8.3% year on year in April.[
“New information following the release of these projections, including weaker-than-expected GDP growth in the first quarter, would indicate a further downward revision to the projected GDP growth rate for this year as a whole,” said Governor Pablo Hernandez de Cos. Wednesday.
In its annual report, the Bank of Spain added that “in the absence of any additional consideration, this would lead to a mechanical deterioration of around half a percentage point in the average GDP growth rate in 2022”.
Spain’s growth slowed sharply to a weaker than expected rate of 0.3% in the first quarter compared to the previous quarter, leading the government to cut its growth outlook for this year to 4.3% against 7%.
Still, De Cos said the possible further revision to the projections, subject to “extraordinarily high uncertainty”, would remain consistent with the path of gradual economic recovery.
Spain would not reach pre-pandemic GDP levels until late 2023, with inflation rates remaining high in the coming months, before moderating thereafter, De Cos said.
“In the coming months, the Iberian mechanism for limiting gas prices and lowering electricity prices – recently approved in Spain and Portugal, in agreement with the European Commission – is likely to exert downward pressure on energy prices in Spain,” he said.
(Reporting by Jesús Aguado; editing by Andrei Khalip, Kim Coghill and Emelia Sithole-Matarise)