Slowdown expected in Spanish economic activity

Bank of Spain Economics and Statistics Director General Ángel Gavilán predicts a slowdown in economic activity, penalized by the same “headwinds” that weigh on the global and European outlook, such as inflation, uncertainty, the energy crisis, and the tightening of financial conditions.

During his speech at the Swiss Bankers Executive Study Tour, held on Monday at the Madrid Stock Exchange, Gavilán explained that, despite the strong tourist season, there are already some signs of weakening economic activity, as in the case of employment, as well as in confidence indicators and consumption and production indicators.

However, the Director General of Economy highlighted the data of the second quarter, with a GDP growth higher than expected, thanks to the reopening of the economy. He acknowledged, however, that inflation continued to surprise on the rise and spread to the entire consumer basket.

In this sense, the Bank of Spain has predicted that the high levels of inflation “will persist longer than expected.” According to the latest forecasts published in June by the body headed by Pablo Hernández de Cos, GDP will grow by 4.1% in 2022 and 2.8% in 2023, while average annual inflation will be 7.2% in 2022 and 2.6% in 2023.

All in all, the Bank of Spain estimates that this expected evolution of GDP will allow the Spanish economy to return to its pre-pandemic level of production in the second half of 2023.

With regard to the Eurozone, the Director General of the Bank of Spain pointed out that after a strong first half of the year, stagnation is expected in the second half of 2022 and in the first quarter of next year, in a context of higher and persistent inflation dynamics.