The OECD cuts its growth forecast for Spain to 4.1% in 2022 due to high inflation | Economy | The USA Print


Spain is still on the way out of the crisis, but the goal seems more and more distant. Two years after the outbreak of the pandemic, the economy still hasn’t recovered all its muscle. First there were the multitude of variants of covid-19; then the war in Ukraine, and now the fatal combination of the consequences of both crises, which has taken the form of runaway inflation. All this will weigh down the growth of Europe, also of Spain. The Organization for Economic Cooperation and Development (OECD) has lowered Spain’s growth forecasts for 2022 to 4.1%, from the 5.5% it contemplated last December. For 2023, it now projects 2.2%, instead of 3.8%. The agency also believes that average inflation will be 8.1% this year and 4.8% next year.

The path is still one of growth. Spain still has tricks to continue expanding at a good pace. Among them, in the report presented this Wednesday, the OECD cites the savings bank accumulated during the pandemic, the government’s measures to mitigate the effects of the war, European funds and the recovery of tourism. But forecast to forecast, the forecasts are subtracting growth points. The OECD points to three causes: “greater uncertainty”, “high inflation” and external demand that will be less vigorous. Spain will continue to grow above the euro zone average, whose GDP will grow by 2.6% in 2022 and 1.6% in 2023, but much less than forecast a year ago. Without the war, the OECD predicted a jump of 6.6%.

Now the Paris-based organization leaves its forecasts even below those of the Government, which predict 4.3% in 2022 and 3.5% in 2023. And it points the way to Spain towards fiscal consolidation, asking for a tightening of its fiscal policy while protecting the most vulnerable businesses and citizens from inflation. In this regard, the institution considers that the agreement with Brussels to limit the price of gas in the Iberian wholesale market “can help contain” the CPI. However, he warns that inflation will remain high in 2023 despite the fact that it will moderate.

International organizations monitor above all the so-called “second round effects”, which have become almost a mantra. In particular, they want to prevent inflation from being transferred in all its magnitude to wages and that these generate an inflationary spiral. The OECD concludes that with multi-year collective bargaining and a low proportion of indexation clauses, “wage growth remains moderate”. Thus, it estimates that in the first quarter wages rose by 1.3%, while in March inflation rose to 9.8%. But the report does see that agreements with review clauses are growing. And following the path opened by the Bank of Spain and the Government itself, it recommends to the social agents a kind of income pact, an agreement to share the burden of this crisis and avoid a spiral of wages and prices.

deficit containment

The report highlights, however, the boost that the labor market has gained and the percentage of indefinite contracts in new contracts, which has gone from 10% to 48%. He also refers to the reform to guarantee that pensions do not lose purchasing power, which in his opinion support household income but also increase public spending. Even so, the increase in public revenue and the withdrawal of the measures linked to the pandemic will continue to reduce the public deficit to 4.2%, three tenths more than forecast by the Government.

He knows in depth all the sides of the coin.


The risks are still multiple: more disruptions in the energy market or greater contagion in the final prices of products or wages. Those two scenarios would lead to higher inflation, which punishes household consumption and investment. There are worse prospects: an escalation in the war in Ukraine or a new virulent wave of covid-19 due to new variants.


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