GDP growth forecasts lowered due to Ukraine war impact

The Catalan government has lowered its economic growth estimates for this year by 1.5 points. Before Russia's invasion of Ukraine, the department of economy and finance expected the Catalan GDP to grow by 6.4%, but this has since been lowered to 4.9%.

The administration does not plan to recover pre-pandemic levels until 2023 when forecasts predict the GDP will grow by 2.9%.

By these projections, the Catalan GDP will reach a total of €266 billion this year, almost €23 billion more than in 2021.

In terms of employment, the economy minister Jaume Giró expects some 85,000 jobs to be created this year, surpassing pre-coronavirus levels, with unemployment falling to 10.4%.

Spain cuts growth forecasts

The Spanish government has also lowered its forecasts for economic growth in 2022 due to the impacts of the war in Ukraine and the economic consequences the invasion is having across the continent and world. 

Officials had initially expected to see a growth of 7% as the country consolidates its recovery after the pandemic, but this estimate has now been lowered to 4.3%. 

Macroeconomic estimates presented this Friday by Pedro Sánchez's executive cuts 2.7 points from the previous forecast from September last year due to the "intense uncertainty" of the international context. 

Nadia Calviño, Spain’s minister for economic affairs, explained in a press conference that the forecasts were made with "extreme caution" and were marked by Russia’s invasion of Ukraine and the escalation of energy prices, as well as the “persistence” of the effects of the pandemic and the “problems in global supply chains.”

Calviño had already previously explained that growth forecasts would be lowered "significantly" as a result of the Ukrainian war, in line with the latest estimates of agencies such as the Bank of Spain and the International Monetary Fund (IMF), who predict growth of 4.5% and 4.8% respectively – two estimates ultimately higher than that the Spanish government offered on Friday.

Inflation and cost of living crisis

Rising costs in energy, fuel, and food are causing inflation to soar, which is contributing to a cost of living crisis in many parts of the world including Catalonia. 

Inflation in Spain dropped slightly in April from an all-time high in March, yet it remains very high at 8.4% according to preliminary figures published on Thursday by Spain's National Statistics Institute.

To help ease the burden of the cost of living crisis, the Spanish government is offering a discount on the price of fuel of 20c per litre until at least June 30, and has also agreed on a cap of electricity prices for a year with the European Union which is expected to be reflected in consumer's bills in May. 

For more on the cost of living crisis, have a listen to the episode of our podcast, Filling the Sink, published in early April on the topic.

First quarter results

The first quarter of 2022 saw a slowing down of the Spanish economy. The country’s GDP growth fell by 1.9 points in the first three months of the year compared to the previous quarter, standing at 0.3%. 

In a period marked by the outbreak of war in Ukraine and rising prices, consumer spending fell by 2.3%, with a particularly sharp drop of 3.7% in household spending. 

Public administration spending remained positive, with a quarterly increase of 1.3%. Compared with last year, the GDP grew by 6.4% in the first quater, above the 5.5% recorded in the previous quarter.