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In such a situation, the government is doing it wrong to subsidize everyone.

The Foundation for Applied Economics Studies (Fedia) has recently prepared a detailed report in which it unveils the dangerous spiral…

By admin , in news , at May 13, 2022

The Foundation for Applied Economics Studies (Fedia) has recently prepared a detailed report in which it unveils the dangerous spiral in which inflation And this invasion of ukraineAnd the government seems to have failed to focus well.

As the report points out, by far the most important channel for transmitting the economic effects of Ukraine’s invasion to other countries has been strong price hike In international markets for energy and other essential raw materials. “Energy prices began to move upward in the second half of 2020, once the worst of the pandemic had passed, and shoot up in the second half of 2021 and the first months of the current year, particularly in the case of gas and electricity. Gave. Its current price (in March) multiplies 5 to 6 times its average price in 2017 and more than 15 times two years ago,” he indicates.

Since Spain and the vast majority of European countries are large net importers of energy and raw materials, their prices have risen. significant macroeconomic impact, “Tracking energy prices very closely, the import deflator (average price) increased in the second quarter of 2021 and reached a year-on-year rate of change of close to 25% with the start of the war. Import prices The accumulated growth in the U.S. represents a significant loss of real income, which, in the absence of adjustments, could reach the seven digits of GDP count by early 2021,” he explains.

So we have a strong . are facing with Shock Supply is negative, which is the Fedea . is according to lowers the net income of the country and exerts upward pressure on their prices: «Since the increase in prices is concentrated first in energy, which is a vital input for the production of almost all goods and services, there is a general increase in the cost of production that transfers regional supply curves upward, pushing prices up and Decrease in production, employment and trade margins, new ShockTherefore, will come impediment to recovery In the last one, undermining the expected growth rate of our economy, as forecasts by international organizations and private analysts and, to a lesser extent, the latest data on GDP and employment are already starting to collect.

where the effect Shock it . is in development consumer pricesWho is there? strong comeback For months in Spain and the rest of the European Union. The energy component of the CPI is the one that grew the fastest during the past year, with year-on-year variation that in March was up from 40% in the European Union and the euro area, and above 60% in Spain. But it is not the only one: «The food component of the index also shows a markedly upward trend since the middle of last year, but much less rapid than the energy component, with year-on-year variation rates in March. stands together. 8%. If we remove these two components, underlying inflation would currently be around 4%, which is less than half the variation of the general index, but a . with clear and strong upward trend Since last summer it shows that the rise in energy prices is beginning to spread to other regions.

The Spanish government has responded to the crisis caused by invasion of ukraine With a series of measures that basically seek to soften the rise in energy and other raw material prices and protect households and companies from its consequences, with a special focus on the most affected sectors and most vulnerable group, “Many of these measures are, to a large extent, specific aid of a temporary nature, aimed at the sudden increase in the cost of energy and other raw materials and most affecting the productive sectors in households with fewer resources. more debatable It is that palliative action should be extended to all companies and households, as is being done through the introduction of general rebates on fuel prices and the reduction or suspension of taxes on electricity. Normalization of aid greatly increases its budgetary cost, waste resources directing them to groups that are least affected by them Shock You stimulates energy demand, helping to raise their prices and increase Russia’s income from its exports. A better option Special taxes resulting from increased VAT collections and rising energy prices would have to be allocated to compensate groups most affected by such increases. Another possibility that can be considered is . introduction of Tariffs on Russian fossil fuel imports, These rates would generate additional income to compensate for the losses of the crisis and discourage the consumption of Russian-origin energy at the expense of its cause. As can be seen, there are alternatives to the measures being taken by the government which appear to be more effective and would require less cost.

In such a situation, the government is doing it wrong to subsidize everyone.

2022-05-13 02:12:52