Miguel Fernández Ordóñez, governor of the Bank of Spain, has described the evolution of the global economy as "optimistic", as he explained in a conference held this Monday in the capital of Gran Canaria. In the absence of the report on the outlook for the Spanish economy during this year, which will be released tomorrow, and of which he did not want to anticipate anything, the growth of the Spanish economy "may be around 2.8 percent for this year and 2.1 percent for next year".
Fernández Ordóñez added that "it will be difficult" to achieve growth above 2 percent. However, he considered that the current slowdown situation should be analyzed "without alarmism". The top leader of the Bank of Spain described the current situation as "full of uncertainties about an immediate future", although factors of "resistance" can be found that force us to look "forward with some confidence".
These factors are specified in a "favorable" initial economic situation with "robust global growth", a "healthy" position of companies and "contained" inflation. These, together with "economic growth and the reduction of the vulnerability of emerging economies" can "limit", according to Fernández, "financial turbulence".
In this context, the economic slowdown in the US, a product "according to all experts" in that "there have been obvious regulatory failures", can contribute to the correction of global imbalances. And lastly, Fernández Ordoñez considers that resistance is a product of the globalization process, since "there is more than one locomotive" and due to the "competitive pressures derived from globalization".
Therefore, some economies can remain on the sidelines and in the longer term "the current episode of turbulence could correct the accumulated excesses", he explained to conclude his speech.
Fernández Ordoñez also took time to analyze the economic policies developed so far to alleviate the effects of the slowdown. Contrary to the "activism" developed in the US, in Europe no urgent measures have been put in place because "there is no economic emergency". Specifically, he described the monetary policy established in the euro zone as "particularly adequate" because, among other things, it has contributed to maintaining price stability that offers "a robust anchor".
INFLATION
Price stability is an important objective. Therefore, Fernandez Ordoñez insisted on the need to transmit to the population that "we do not want to exceed the 4 percent barrier and we aim to return to 2 percent". It is important that investors and the population in general "trust that we are working to achieve this objective".
With regard to fiscal policies, "the temptation to squander the progress made in consolidating public accounts in recent years must be avoided". Therefore, and at a time described by the governor as "cyclical slowdown", automatic stabilizers should be allowed to act.
PERSPECTIVES
Looking ahead to 2008, the prospects for the global economy are for a slowdown in world GDP of around 4 percent, although still above the average growth of recent decades and "very far" from what could be described as a "global recession".
The United States, which is experiencing a "notable but short" slowdown, will grow below 1 percent and the rest of the developed economies will do so by around 2 percent. It is worth highlighting the development of emerging economies, a group led by China, where growth "will remain at rates of 7 percent" and which will contribute to the maintenance "and even recovery of the rest of the economies".
The economy of the euro zone has "solid" foundations to face the change in the economic landscape in the medium term, according to Fernandez Ordoñez, which derive from the "favorable equity situation of companies, the high rate of job creation and the greater weight of trade with areas less exposed to financial disturbances".
Therefore, it is foreseeable that although inflation will remain at "high rates" for some months, in the second half of 2008 a "progressive phase of re-conduction" towards the level of 2 percent will begin. This forecast faces the risks derived from "the uncertain evolution of the price of energy and raw materials" and above all, "that generalized second-round effects emerge in the setting of wages and prices".
INVESTIGATIONS INTO BANKING ENTITIES
The governor of the Bank of Spain denied to the media that this institution is carrying out investigations into specific banking entities located throughout the national territory, as a result of their poor financial situation. In this regard, he stated that "we are always vigilant" as "a normal process of our operation".
He also described the growth of Spanish banks and savings banks as "scandalous" compared to those of countries in our environment, all due to the "strength of these institutions and the good management developed so far".
ACN Press
