off-the-wire

Bank of Spain sees 2023 growth close to 2%, above previous estimate

Kitco Media
By Reuters
Published:
Updated:
Reuters
MADRID, May 10 (Reuters) - Spain's economy is likely to grow close to 2% in 2023, exceeding the central bank's latest forecast of 1.6%, Bank of Spain Chief Economist Angel Gavilan said, citing a slowing inflation and stronger-than-expected expansion in late 2022 and early 2023. The economy should also benefit from EU-backed projects and the reopening of the Chinese economy, he told a news briefing on Wednesday, while Bank of Spain Governor Pablo Hernandez de Cos also projected growth rates above 2% in 2024 and 2025. The economy expanded 0.5% in the first quarter from the preceding three months, beating the central bank's forecast of 0.3%. Gavilan said Spain would likely reach its pre-pandemic output levels in the second quarter of this year.


Still, the central bank warned in its annual report that any projections were subject to high uncertainties, such as how long the war in Ukraine would last, and the evolution of the global economy in a context of monetary policy tightening.


Gavilan welcomed last week's preliminary wage increase agreement in Spain's collective bargaining process, which he said should not significantly impact the central bank's inflation projections. "We do not expect significant second-round effects in our central scenario...and see moderate wage growth over the coming years," Gavilan said, expecting also "a path of moderation in corporate margins". In March, the central bank lowered its prediction for Spain's consumer inflation to 3.7% this year from 4.9% estimated previously and after 8.3% in 2022.


Regarding monetary policy transmission, Gavilan said
Spanish banks had been lagging euro zone lenders in remunerating deposits due to a reduced need to fund themselves with deposits and a higher concentration in the sector. (Reporting by Jesús Aguado, editing by Andrei Khalip)

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