The economy has already begun to gain momentum after the energy shock resulting from the Russian invasion of Ukraine and the forecast is that in the coming months the Government will lift the measures put in place to cushion the blow to companies and individuals. Between tax cuts, bonuses for energy products, transport subsidies or transfers to companies, the announced aid will have entailed a cost of between 34.320 and 39.900 million euros. One of the unknowns is now how his withdrawal will affect the economy.
The recently presented annual report of the Bank of Spain predicts that this year the withdrawal of the different aids will push inflation up by about 0.7 percentage points, while in 2024 it will do so by 1.5 points. The forecast of the institution is that in 2023 they will be without effect, apart from the fuel bonus, the Iberian exception and the limitation on increases in the regulated gas tariff (TUR). Next year, subsidies for public transport and the reduction of both VAT and electricity charges should cease to apply.
These forecasts do not cloud the Bank of Spain’s perception of the state of the economy. He is confident that this year inflation will drop to 3.7% and that growth will be around 2% so that, between 2024 and 2025, it will average above 2%. The extraordinary measures will still contribute 0.2 points to GDP in 2023, but the forecast is that next year they will operate in the opposite direction and push it downward by 0.6 points.
A few days before the presentation of its annual report, the Bank of Spain had already made an assessment of the effect of the government’s measures after the invasion of Ukraine. His calculation was that they had contained inflation at 2.5 points in 2022 and pushed GDP up by 1.1 points.
In the annual report, the institution has gone further and has used its own econometric model, called MTBE, to calculate “counterfactual scenarios” and measure in the medium term “the risks or effects of economic policy initiatives”. points.
The Government has already withdrawn the general discount on fuel, but has not given a date for the rest of the exceptional measures adopted. For the Bank of Spain, many of them should expire between June and the end of this year, although there is “high uncertainty” in this regard.
In the fiscal area, the largest amount is the temporary reduction in VAT on electricity and gas, with an impact of around 6,300 million euros, compared to 700 million for the food reduction. The check for 200 euros for vulnerable households amounts to 920 million, compared to 1,700 million for the public transport subsidy.