He is having one of the evolutions most feared by economists: a long-term war. Half a year after the outbreak, the confrontation is still latent in Eastern Europe, with the consequent impact on the economy of the old continent. The energy crisis and the disruptions in the supply chains weighed down GDP growth by 1.5 points in the eurozone, while the price crisis multiplied Spain’s inflation prospects by six (8% on average at the end of the year, up to 4.8 points more than before the war) compared to the euro average (4.3%, 0.8 tenths more): in total, four points above the eurozone average for this 2022.
The outlook tables launched by the main international analysts and, in turn, gathered the consensus of the Funcas panel among national economists, explained the usual winter projections before the war. The data observed to analyze how the medium-term view of economists has changed correspond to the months of December and January. Projections that address the marked uncertainty that economies have suffered since the previous Covid crisis and that has gained -even more- ground as a result of the war in Ukraine.
Gap compared to the eurozone
Thus, it is especially relevant how the outlook for prices has worsened six times more in Spain than in the euro countries as a whole, which explains the difference in the behavior of inflation in the southern economy. The average inflation differential at the end of this year would leave a burden for Spain that is close to four points; specifically, it would be around 3.7 points.
The highest inflation trend considering the data confirmed by the INE in July. Currently, Spain is the great economy of the eurozone that leads the inflation table in the eurozone.
As the economist Javier Santacruz explains to this medium, this factor is evident for a number of reasons. “In Spain, the energy crisis has directly translated into a much higher rise in retail electricity and gas prices than in Europe because we have 40% of electricity consumers and 70% of industrial consumers with a rate that instantly replicates the daily price of electricity,” Santacruz told elEconomista.es.
The escalation in the price of gas also stands out in this regard, with a similar impact in terms of the importance of consumer bills in Spain.
A point of pressure on the CPI rate is also being the , highlights Santacruz, which in the latest data have gained special weight. Up to 21 food products become more expensive by more than 12%, according to the latest data published by the INE for the month of July. This lace for the pocket considerably increases the monthly bill on basic consumer goods.
Similar GDP cut
Where analysts have maintained a similar stance is in the worsening prospects for growth in economic activity. For Spain, the increase in GDP is expected at 4%, and for the eurozone over 2.6%, which represents a cut that orbits a point and a half in both cases.
Of course, what the new forecasts that take the war into account confirm is that the Spanish economy will not recover this year from the fall in 2020 due to the pandemic. In the best of cases, it would recover over 90% of what was lost that year, moving the goal away until at least 2023. All this, at the expense of the economic uncertainty that is expected after the summer season.
In the case of the eurozone, both the European Commission itself lowered GDP growth to 2.6% in the July update, while before the war it expected 4%. Following this roadmap, the average of the euro countries would recover the pre-Covid level throughout this year.
Thus, the terminology war or Ukraine has been established in the justification of the macroeconomic data of each organism. The economic slowdown appears in Europe, according to the latest data from the PMI indicators, while the labor market looks down for the first time since the end of strict confinement. Autumn will reveal many clues to the economic future.
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