Bank of Spain forecasts a slowdown in economic activity, despite the "strong" tourist season

He warns that high levels of inflation "will persist for longer than expected"

MADRID, 12 Sep. (EUROPA PRESS) -

The Director General of Economy and Statistics of the Bank of Spain, Ángel Gavilán, foresees a slowdown in economic activity, penalized by the same "headwinds" that weigh on the world and European perspectives, such as inflation, uncertainty, energy crisis or the tightening of financial conditions.

During his speech at the 'Swiss Bankers Executive Study Tour', held this Monday at the Madrid Stock Exchange, Gavilán explained that, despite the strong tourist season, some signs of weakening economic activity are already being observed, such as the in the case of employment, as well as in the indicators of confidence and those of consumption and production.

Of course, the General Director of Economy has highlighted the data for the second quarter, with GDP growth higher than expected, driven by the reopening of the economy. However, he has acknowledged that inflation continued to surprise on the upside and spread to the entire consumer basket.

In this sense, from the Bank of Spain they have anticipated that the high levels of inflation "will persist for longer than expected".

According to the latest forecasts published in June by the body headed by Pablo Hernández de Cos, GDP will grow by 4.1% in 2022 and 2.8% in 2023, while average annual inflation will stand at 7. 2% in 2022 and 2.6% in 2023.

All in all, the Bank of Spain considers that this expected evolution of GDP will allow the Spanish economy to recover the level of output prior to the pandemic in the second half of 2023.

Regarding the euro zone, the director general of the Bank of Spain has indicated that, after a strong first semester, a stagnation is expected in the second semester of 2022 and the first quarter of next year, in the midst of a higher inflation dynamic and persistent.

Regarding the impact of the higher financial conditions on the decisions of economic agents, Gavilán has pointed out that in loans for the purchase of a house, the transmission of the higher market rates to the interest rates of the loans is being, so far lower than in previous interest rate hike cycles.

For his part, he has indicated that the flow of new loans to the private sector remains, so far, quite stable, although he sees "likely" that higher interest rates, lower confidence and the increase in energy prices weigh on household consumption and investment decisions for the future.

The same is true, according to Gavilán, in the case of companies, although their activity and profit indicators have improved substantially once the most acute phase of the pandemic has passed.