The Bank of Spain in its 2021 annual report announced a new downward revision in the expected GDP growth rate for this full year. The unit had already forecast a decrease of 4.5% in early April. Information released after this projection, including lower-than-expected GDP growth in the first quarter, “in the absence of additional shocks”, would point to a further downward revision of GDP growth forecast for this year.
The unit indicates in its report that epidemiological developments in the first months of 2021 still require the maintenance of relatively serious measures to prevent the disease affecting the future of economic activity. The progression of vaccination allowed for greater mobility in the second trimester. However, mobility was reduced by changes in supply chains and an increase in energy raw materials. It was joined by the Omicron version of the virus at the end of the year. 2021 closed with GDP down 3.8 percentage points from its pre-pandemic record.
By early 2022, the report suggests, some timid signs of overcoming the pandemic’s final outbreak and easing constraints were helping to ease the risk factors that were holding up the growth of Spanish economic activity. Expectations of greater economic dynamism were also supported by the execution of European funds and a possible release of savings accumulated by households during the pandemic.
However, the Russian invasion of Ukraine at the end of February has brought about a new negative unrest that is affecting the Spanish economy through various channels, as well as other economies in our environment. Among these channels, rising inflationary pressures on raw materials, declining confidence of economic agents and slowdown in international trade are prominent. All this has resulted in a significant decline in growth prospects in the short term and an intensification of inflationary pressures.
Bank of Spain announces a new downward revision of GDP growth