The year will see inflation remain at high levels. Although the March peak (9.8%) will be reached, economists predict that the annual price rate will finish at 7.1%. This is well below the range that the General Council of Economists indicated just one month ago, which was between 5% to 5.5%.
Antonio Pedraza (president of the financial commission) assured that inflation would fall “gradually”, but that this depends on external factors like the development of the conflict in Ukraine. He asked employees, officials, and pensioners to be as flexible as possible, since families, businesses, and the public administrations will need to make efforts in an environment with high inflation and rising rates of interest.
They believe that the income agreement is “absolutely necessary” for the public sector and that it “tie its men so that the example spreads”. This refers to the increase in the salaries of civil servants, which are not known in what percentage, and to linking pensions and the CPI. This would increase Social Security spending to 1,700 million per additional point of inflation.
His calculations show that the economy will grow by 3.9% this year, nearly half a point less than the forecasts of the Government, which are at 4.3%. President of the CGE Valentin Pich stressed that while Spain’s growth will be higher than the average in the euro zone this year, it still needs to recover 3.4 percent of its GDP to get back to pre-pandemic levels.
Pich believes it is likely that the recovery will be completed by next year. Others, such as France and Germany, have achieved it already or will this year. Even though there are many unknowns, it is highly likely that the reactivation tourism will be a tool to boost the economy during the second half.
The CGE predicts that the unemployment rate will fall in the summer months to 13.2% by the end of the year, three tenths lower than the forecast. The deficit will finish the year at -5.3% GDP, three tenths higher than what the Government calculates. Public debt will close at 116.5%, which is almost one point more than the Executive’s forecasts.
