The Independent Authority for Fiscal Responsibility (AIReF) has revised downwards its GDP forecast for this year, placing economic growth at 4.3%, which is two points less than in its previous estimate, which was 6.3%, according to publishes the Initial Budget Report of Public Administrations (AAPP) 2022.
For its part, the inflation estimate also shoots up to 6.2% at present, compared to 1.8% forecast in October, updated data that resembles the forecast cut established by Funcas, the Savings Banks Foundation, last March, which marked GDP at 4.2% and inflation at 6.8% for this year.
The report has updated its macroeconomic and fiscal forecasts in the face of the uncertainty posed by the new macroeconomic scenario, marked by the war conflict and the inflationary tensions that have not been seen since the 1970s, with special emphasis on energy markets. Nor is it ruled out that the impact of the persistence of the pandemic will further prolong the shortage of supplies.
The AIReF points out that "price tensions are causing a decline in the purchasing power of households and in competitiveness vis-à-vis the exterior, while at the same time they have led to a change of tone in monetary policy and greater volatility in financial markets".
In addition, the report also reduces the deficit forecast by six tenths, from 4.8% of GDP in the previous report to 4.3% in this new year. This is mainly due to the progressive withdrawal of restrictions due to coronavirus, as well as the evolution of income associated with the economic cycle and expenses not related to the pandemic.
However, the measures implemented to alleviate the effects of the war outweigh the effect of the tax measures incorporated in the General State Budgets, shortening the decline in the country's overall deficit by two tenths.
Faced with this inflationary environment, the AIReF urges the Government to establish a medium-term fiscal strategy that orients and guarantees, in a realistic and credible manner, the financial sustainability of the AAPP, although they point out that it is inevitable that this strategy will have to be made more flexible at specific times due to the scenario of economic uncertainty.