The governor of The Bank of Spain has dispelled the rumours that a recession is looming but has admitted that financial stagnation exists
Pablo Hernández de Cos, The Governor of the Bank of Spain, took full advantage of his appearance before the Senate Budget Committee recently by conveying a message of prudence and financial diligence to the Government.
He warned that the negative effects of inflation on public spending are not yet perceptible. The governor went on to insist that they will eventually appear, and it is very likely that they will begin to do so in early 2023.
In the current situation, inflation has risen to 8.5%. This is mainly due to the pressure caused by the rise in energy and food prices.
Some inflationary effects have already been added to the Budget proposal for 2023, such as those related to the revaluation of pensions. Pay rises for public service employees have also been factored into the spending calculations.
In line with what was proposed by the International Monetary Fund (IMF), the Bank of Spain considers that it would be appropriate for the Government to address a structural fiscal adjustment of around 3,000 million euros next year in order to put its accounts in order.
De Cos also warned that although the Government’s budget roadmap complies with the fairly prudential parameters established by Brussels, a massive extension of the measures in force today to alleviate the impact of inflation could lead Spain to breach those parameters.
He once again recommended that the Executive reconsider the tax reductions on the price of electricity and the discount of 20 cents off the price of fuel.
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