Bottlenecks, soaring prices could ‘significantly’ dampen GDP growth: Bank of Spain

By Alyssa McMurtry

OVIEDO, Spain (AA) – Spain’s 2021 GDP growth will be “significantly lower” than the previous forecast due to problems with global supply chains, industrial bottlenecks and increasing prices, according to the governor of central bank.

“The economic recovery is clearly incomplete,” Bank of Spain Governor Pablo Hernandez de Cos said on Monday. “In the second quarter, there was still an 8.4 percentage point gap in GDP compared to the end of 2019.”

While the Bank of Spain will not release its new macroeconomic forecasts until December, other key organizations have already been slashing expectations.

Earlier this month, the International Monetary Fund (IMF) cut its 2021 growth forecasts for Spain’s GDP from 6.4% to 5.7%. The BBVA bank also similarly reduced its prediction for 2021 to 5.2%.

According to the last forecast by the Bank of Spain, Spain’s GDP is expected to grow 6.3% this year, while the Spanish government is working with a figure of 6.5% to create its upcoming budget.

Spain has been hit by soaring energy prices and shortages of in-demand goods due to issues with global supply chains.

“These increases have translated to the final prices paid by consumers and businesses, which reduce their net income and negatively affect the rhythm of recovery,” said Hernandez de Cos.

Several of Spain’s largest industrial companies have recently said they will reduce production due to dizzying increases in energy. According to the union UGT, in September, industrial companies in Spain paid €103 ($120) per megawatt-hour (MWh) compared to €44 in France or €69 in Germany.

Meanwhile, Spain’s tourism sector, while recovering, is not expected to return to pre-pandemic levels until 2023.

The implementation of the massive Next Generation EU funds will be “crucial,” the governor said, but he admitted that incorporating them into the economy “is more complicated than we originally estimated.”