Goldman Sachs joins the trend and forecasts lower growth in Spain
The growth of the Spanish economy will slow down substantially next year, when GDP expansion will be 0.6%, compared to 4.6% estimated for this year by the US bank Goldman Sachs, which anticipates a mild recession for the entire euro area as a result of the energy crisis. Thus, the forecast of the influential Wall Street entity It is two tenths above that managed by the Spanish Government for 2022but contemplates growth well below the 2.1% expected by Moncloa for 2023.
Likewise, the forecast of Goldman Sachs is more optimistic for this year than that of the International Monetary Fund (IMF)which provides for a 4.3% expansion in 2022as well as that of the European Commission, which anticipates growth of 4.5% this year. However, looking to 2023, the US bank is more pessimistic regarding Spain, since the IMF forecasts an expansion of 1.2% and the EC of 1%.
In any case, Goldman Sachs points to Spain as the large European economy that will perform best in recent years, since anticipates a mild recession for the eurozoneincluding falls in the GDP of Germany and Italy in 2023. Thus, The entity forecasts that the euro zone economy will grow by 3.3% in 2022 to go back one tenth in 2023 and grow again by 1.4% a year later.
Among the main euro economies, apart from Spain, the bank expects Germany to grow by 1.8% in 2022to suffer a contraction of 0.6% in 2023, and rebound by 1.4% in 2024, while France will grow by 2.5% in 2022, 0.1% in 2023 and 1.3% in 2024. On your side, Italy will register an expansion of 3.8% this year to contract 0.1% next year and grow 1.3% in 2024.
“The energy crisis will push the European economy into recession this winter (…) But now we see a less deep recession, since data has remained surprisingly resilientthe rebalancing of the gas market has reduced the risk of energy rationing and governments have provided significant fiscal support.
Thus, he now expects the economy of the euro area will contract by only 0.7% between the fourth quarter of 2022 and the second quarter of 2023, compared to the previous 1.1%. In this sense, it is worth noting that Germany and Italy will be more affected by the energy crisis than France and Spain. In any case, the bank warns that the gas supply situation in Europe remains fragile, while fiscal policy will likely slow growth in 2023-24 as energy support wanes, so the gas crisis is likely to cause substantial damage on the supply side.
“Therefore, we see a moderate recovery and cut our growth forecasts for the second half of 2023 and the first quarter of 2024,” it adds. Regarding inflation, although gas prices have fallen significantly, the entity expects it to reach its peak in decembernoting that core inflation is likely to gradually decline throughout 2023, although he anticipates “a sticky service inflation” due to the continuous pressures of labor and energy costs, for which reason core inflation is expected to close 2023 at 3.1% and 2024 at 2.2%.
In this sense, he points out that the key issue to take into account in 2023 will be the labor cost pressures, with the expectation that the recession will push the unemployment rate to 7.2% in the second quarter of 2023 from 6.6%. “Combined with persistently high headline inflation, we expect wage growth to average around 4.5% in the first half of 2023, before relaxing at the end of 2023″, the entity points out, stressing that the stabilization of long-term inflation expectations suggests that the risk of pronounced second-round effects “remains limited”.
The ECB will raise rates one and a half points more
On the other hand, given the reduced risks of a deep recession in the eurozone and in the face of persistent inflationary pressures, Goldman Sachs expects the European Central Bank (ECB) will raise interest rates by an additional 150 basis points until May 2023situating the reference rate at 3.50% and the deposit rate at 3%.
In this sense, the bank bets because the ECB will reduce the pace of rate hikes to 50 basis points at the December meeting, in parallel with the Federal Reserve. Likewise, it maintains the forecast of a second increase of half a percentage point in February but, given the prospect of firmer demand, it now expects two additional increases of one quart each at the meetings in March and May.
In this regard, Goldman Sachs acknowledges that its expectations have a Upside risk linked to potentially more persistent core inflation and a downside risk related to the possibility of a deeper recession or a possible resurgence of sovereign risk in Italy.
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