Banco de España Upgrades Growth Outlook to 6.2% in 2021, 5.8% in 2022

14 June 2021

By David Barwick – FRANKFURT (Econostream) – The Spanish economy will expand by 6.2% this year and 5.8% next before slowing to 1.8% in 2023, according to the latest projections of Banco de España, released Monday.

The updated forecasts include upward revisions of 0.2 pp and 0.5 pp to this year and next, respectively, versus the last Banco de España projections of three months ago. This reflects ‘the positive impact on activity of the change in the assumptions underlying the projections and the greater dynamism of output in the current quarter’, the bank said.

Although the recovery seen in Spain in the second half of 2020 was interrupted early in the current year, due chiefly to the resurgence of the pandemic, a more favourable environment meant that already in the first quarter, some economic improvement was visible, the Spanish central bank said.

This upturn ‘intensified notably’ in 2Q, as the public health situation became more positive and containment measures could be eased. Recent survey results underscore expectations of further economic recovery and support expectations of a significant quarterly acceleration in 2Q, the bank said.

‘However, uncertainty about the magnitude of this rebound is high’, Banco de España noted. Scarce data in 2Q make estimates difficult, while incoming information is harder to interpret in annual context, it said. Still, 2Q GDP could come in at 2.2% q/q.

The rest of the year is subject to uncertainty about the pandemic, though vaccination progress ‘provides a favourable context for the Spanish economy to enter a phase of sustained growth’, the Spanish central bank said. By end-August, 70% of Spaniards should be vaccinated, so that restrictions on activity could disappear by the end of the year, it said.

Spanish economic developments will be helped by simultaneous improvement among trading partners, in addition to which ‘the monetary policy measures adopted by the ECB to date and fiscal policy actions in Spain will, over the projection horizon, continue to provide significant support to aggregate demand and private agents' income’, Banco de España said.

Spanish GDP would return to pre-pandemic levels in the second half of 2022 and would exceed it by 1.9% by end-2023, according to the forecasts.