The Diplomat
The Spanish Government sent yesterday to the European Commission the Stability Program 2022-2025, which presents “macroeconomic and fiscal perspectives marked by maximum prudence in the face of the high uncertainty of the war”.
“In the current context of high uncertainty due to the international geopolitical situation and the sharp rise in energy prices, the macroeconomic and fiscal scenario is marked by the principle of maximum prudence,” said yesterday the First Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calviño, in a joint conference with the Minister of Finance and Public Function, María Jesús Montero.
The Government’s Delegate Commission for Economic Affairs has updated the Stability Program 2022-2025 and the National Reform Program 2022 for their submission to the European Union, which took place yesterday in compliance with the annual obligation of all Member States to submit their National Reform Programs and Stability Programs to the European Commission in April, within the framework of the European Semester for the coordination of economic policies.
In both documents, the Government explains the economic policy measures adopted to mitigate the impact of Russia’s war in Ukraine, aimed at compensating citizens for the increase in the price of energy and fuel, and protecting the most vulnerable groups and the most affected sectors. It also addresses the effects of the investments and reforms of the Recovery, Transformation and Resilience Plan, as well as the macroeconomic and fiscal scenario for the reference period. The new macroeconomic framework has been endorsed by the Independent Authority for Fiscal Responsibility (AIReF).
According to the Executive, “the Spanish economy will remain on a path of economic growth throughout the entire forecast period, which will be more intense in 2022 and 2023, with forecast growth rates of 4.3% and 3.5% in Gross Domestic Product, respectively”. Despite the optimistic tone of the press release, this precision represents a cut of 2.7 percentage points compared to the Government’s previous estimates of 7%.
Apart from this, the Executive forecasts a growth of 2.4% in 2024 (slightly higher than the 2.1% of its previous forecast) and 1.8% in 2025. These new Government forecasts are in line with the estimates of national and international organizations, which in recent weeks have lowered their growth projections for Spain in 2022, specifically to 4.3% (AIReF) and 4.8% (IMF).
The rise in energy prices has led to an acceleration in the general price level since mid-2021, which has intensified at the beginning of 2022 due to the impact of the war and which is having a negative impact on the main European economies and slowing down the recovery of the Spanish economy after the pandemic, which had accelerated in the second half of 2021. However, all forecasts point to a significant slowdown in inflation from the second half of 2022, to around 2% next year, and “in 2022 the growth of the Spanish economy will continue at a good pace, supported, above all, by the creation of quality employment, investment in capital goods and intellectual property, the recovery of tourism and the boost of the investments and reforms of the Recovery Plan”, the Executive assured.
The Stability Program sent to the European Commission, which also includes the fiscal outlook for the period from 2022 to 2025, stresses that “the economic momentum, strong job creation and increased growth will allow progress on the fiscal consolidation path initiated in 2018 and interrupted by the pandemic.” A deficit reduction of 3.3 percentage points from the previous year has already been recorded in 2021 – 1.6 points lower than projected in the previous stability program – and for the period between 2022 and 2025 a deficit reduction below the 3% mark is projected, which “is consistent with the package of measures approved by the Government to counteract the effects of the war on the economy, primarily on price developments.”
