Financial Observatory of the General Council of Economists: Third quarter of 2021
In 2022, greater growth is expected than in 2021 due to the contribution of European aid, a determining factor that must be used to transform the production model and make Spanish companies more competitive. An example is that exports of goods and services will increase. have increased by 15,8% compared to the fourth quarter of 2020, mainly due to the increase in service exports.
Statements offered at a press conference
President General Council of Economists of Spain, Valentin Pich, Presented the Financial Observatory “January 2022 Report” (relative to the third quarter of 2021), prepared by the Financial Commission of said General Council, in an event that had the prominent presence of José Manuel González-Páramo, renowned economist, former executive advisor and former member of the Governing Council of the European Central Bank, Chairman of the European Data Warehouse and professor of IESE Business School, in which the president of the Financial Commission of the General Council of Economists also participated, Anthony Pedraza, and the coordinators of the Financial Observatory, Montserrat Casanovas and Salustiano Velo.
During his speech at the opening of the event, José Manuel González-Páramo has highlighted that “the Covid-19 pandemic will mark a before and after in the environment and development of the monetary policy of the ECB. Given the abrupt and accelerated deterioration of the economy after the outbreak of the pandemic, the ECB has shown that it was not helpless. Their purchases and liquidity provision measures managed to stabilize the markets, counteract the economic contraction and eliminate any hint of financial fragmentation.” In the short term, for González-Páramo “There are two challenges that the ECB will have to face in the coming years. First, it must prepare to normalize rates and the composition of its balance sheet, minimizing the impact on financial stability and resisting pressure to delay the necessary adjustment. Secondly, it must prevent the materialization of upward risks to price stability, from a position even less compromised than that of the central banks of other advanced economies.The ECB is probably the central bank best prepared to avoid any shadow of fiscal and financial dominance. However, any complacency on this front could be detrimental to the achievement of his fundamental mandate: price stability,” the renowned economist concluded.
The president of the General Council of Economists, Valentin Pich, after thanking José Manuel González-Páramo for his participation, stated that “Spain is on the road to recovery, although it has grown in 2021 one and a half points less than expected.” For the president of the economists, “the contribution of European aid suggests greater growth for 2022 than in 2021, but we must follow very closely and control the inflationary process in which we are immersed, which we hope will begin to moderate this year. , which, together with the reduction of the negative impacts of the pandemic, could help to normalize supply chains and balance supply and demand.”
During the presentation of the Financial Observatory, Antonio Pedraza, who summarized the report, stated that “growth has slowed down in the last quarter compared to the previous one, mainly due to the withdrawal of consumptionAlthough investment has increased, the contribution of European aid to growth has been less than 0,3%, compared to the 2% forecast. Furthermore, Pedraza stated that "the inflation differential between Spain and Europe is worrying, as it makes us less competitive, as is the risk that the pressure of energy prices will spread throughout the economy, triggering an inflationary spiral."
Also referring to energy cost, the coordinator of the Observatory, Montserrat Casanovas, has indicated that for 2022 “a certain moderation is expected in the price of raw materials that have been affected by the upward spiral in energy prices.” Regarding the behavior of the markets, Casanovas has reported that “although the Spanish selective has been the red lantern of the most important indices in 2021 (with the exception of the Nikkei), and in January it has accumulated losses of 1,2%, it is expected that in 2022 it will revalue given its potential. We hope that vaccination and new treatments will bring a certain normalization throughout the year and this will be reflected in the hard-hit markets.”
In accordance with the forecasts contained in the Observatory, its coordinator, Salustiano Velo, has stated that “it seems that investment is recovering and, although in January there is a certain slowdown in the services sector as reflected by the PMI indices, we hope that European funds will be used to transform the production model and make Spanish companies more competitive." Likewise, as a positive factor, Velo has stated that "we have been favorably surprised by the figures published in the EPA and the unemployment rate at 13,3% at the end of the year, given the growth of the GDP."
The world economy would have grown by 5,6% in 2021 and could grow by 4,5% in 2022, while the economies of the euro zone and the European Union have had, for their part, growth of 5,2%. in 2021 and an increase of 4,3% is estimated for 2022
Of the conclusions of the Financial Observatory “January 2022 Report” (corresponding to the third quarter of 2021), the following are worth highlighting:
Economic indicators and external position
The recovery of the world economy has continued throughout the year, experiencing a certain loss of momentum in the final stretch of the year, mainly due to the emergence of new outbreaks of Covid-19, tensions in supply chains and the increase in the cost of intermediate and final goods. The world economy would have grown by 5,6% in 2021 and could grow by 4,5% in 2022, while the economies of the euro zone and the European Union For their part, they have had a growth of 5,2% in 2021 and an increase of 4,3% is estimated for 2022.
In the Spanish case, the GDP has registered a variation of 5% in 2021. Consumption, which has suffered a certain slowdown compared to the previous quarter, has increased in an interannual rate of 2,0% compared to the same quarter of 2020, The increase in household consumption was 2,4%, and that of Public Administrations was 1,3%. GDP growth for 2022 is expected to be between 5,6% and 5,8%.
Exports of goods and services have increased by 15,8% compared to the fourth quarter of 2020, mainly due to the increase in service exports. For their part, imports of goods and services have increased by 11,1% in 2021 compared to the same quarter of the previous year.
La annual variation rate of the CPI for the month of December has been 6,5% and core inflation has increased 2,1% in that same period, confirming the upward trend. He Harmonized Consumer Price Index (HICP) places its annual rate at 6,6%, 1,6 points above the HICP of the euro zone (5%) and 1,3 points above the HICP of the EU (5,3%).
As to public deficit, stood at 4,61% in November, 38% less than in the same period of 2020, mainly due to the increase in tax collection. It is estimated that at the end of the year it will be between 4,5% and 5%.
The EPA for the 4th quarter places the unemployment rate at 13,33%, 1,24 points less than in the previous quarter and 2,8 points less than in the previous year. Employment has grown by 840.700 people (4,35%) in the last 12 months, increasing by 744.300 people in the private sector and 96.400 in the public sector. It is estimated that, if the pandemic is resolved and therefore a return to normality, the unemployment rate could be between 12,5% and 13% at the end of 2022.
La Public debt It stood at 1.426 trillion euros in November, 0,3% more than in October and 8,7% more than in the same month of 2020. It is estimated that at the end of 2022 public debt will represent 121% of GDP .
La net financial wealth of households has increased by 7,2% compared to the previous year. Households' gross disposable income has increased by 1,2% in the third quarter, while their final consumption spending has increased by 3,3%. Thus, the household savings rate stood at 3,7% of disposable income in 2021, compared to 4,9% in 2020.
Until October 2021, the capital account surplus and the current account surplus have increased, mainly the latter as a consequence of the improvement in the tourism balance.
Exchange rates and prices of raw materials, oil and stock indices
In 2021, the main stock indices have recorded considerable increases: In Europe, the Eurostoxx 50 index increased by 21%, the Italian FTSE MIB by 23%, the CAC 28,9 in Paris by 40%, and the German DAX by 15,8. 35%. The IBEX-7,9 has had a more moderate growth, 8.713,8%, which is why it stood at XNUMX points at the end of December.
The imbalances between demand and supply have caused notable global inflationary pressures, especially in energy matters. Regarding the price of other non-energy raw materials, a strong rebound has also been recorded in 2021, as is the case of food. On the contrary, the price of gold, which had increased significantly in 2020, has decreased in 2021.
Regarding Forex market, the euro has depreciated against the dollar and the pound sterling, and has appreciated against the yen.
It is estimated that, if the pandemic is resolved and therefore a return to normality, the unemployment rate could be between 12,5% and 13% at the end of 2022.
Interest rates in interbank markets and debt markets
Central banks in some advanced economies have begun to adjust their monetary policies by gradually reducing their asset purchase programs (USA, Canada and Australia) or announcing increases in their official rates (UK).
In the euro area interbank market, interest rates have experienced a slight decline. In secondary debt markets, yields have fallen due to greater uncertainty about the global economic outlook and investors' expectations that the purchases that the ECB has been carrying out could end sooner than expected.
Monetary politics
The Governing Council expects the ECB's official interest rates to continue at their current levels, or lower, until it sees inflation at 2%.
In the first quarter of 2022, the ECB plans to carry out net asset purchases under the Pandemic Emergency Purchase Program (PEPP) at a significantly slower pace than the previous quarter and will end net asset purchases under the PEPP at the end of March 2022. Regarding Asset Purchase Program (APP), has decided to increase the rate of monthly net purchases in the second quarter (40.000 million) and third quarter (30.000 million euros), maintaining a monthly rate of 20.000 million euros from the third quarter onwards for as long as necessary to reinforce the accommodative impact of their official interest rates.
Credit and indicators of financial entities
The slowdown observed in the recovery of economic activity in the final months of 2021 may cause, in the opinion of the Bank of Spain, risk in the credit quality of the most vulnerable sectors, both in households and in companies. Likewise, it focuses on the growth of mortgage credit given the possibility of an expansionary trend sustained over time.
In October, 52.960 million euros in non-performing loans were recorded, 4,4% of total credit. Doubtful doubt registered a rate of 4,9% for all productive activities (-0,1 pp year-on-year), reaching 8,7% in construction and 7,3% in hospitality, the latter sector in the that the rate increased by 2,2 pp
There is a decrease in the granting of new credit operations between January and November 2021 of 12,2%.
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