We expect the slowdown to continue. The European Central Bank’s tightening cycle has taken a lot of oxygen out of the economy and we will surely begin to feel the impact in the coming months. The ECB’s latest bank lending survey published on Tuesday shows credit standards tightening further and demand for credit from businesses and households fell sharply in the third quarter in Spain, which does not bode well for investment activity.
In addition, household finances will come under greater pressure in the coming months. Spanish growth was boosted this year by a recovery in purchasing power thanks to higher growth in nominal wages, strong employment growth and a cooling in inflation. However, job growth is slowing, and higher interest rates and higher fuel prices also threaten to put pressure on household finances. This is certainly the case for households that financed their home purchase with variable interest rates (around a third of all households), who will have less budget left to spend.
Lastly, the tourism sector’s contribution will also be lower next year now that the sector has roughly returned to its pre-Covid level. Furthermore, we should not expect a strong rebound from the manufacturing sector. The manufacturing sector is struggling with a shrinking order book and energy-intensive companies still struggle with a competitive disadvantage. Add to this a slowing global economy, with a stagnant eurozone economy, a US economy that appears to be at its peak, and a Chinese economy struggling to regain momentum, and a further slowdown appears likely in the coming years. months.
All these obstacles will slow down Spain’s growth momentum. While we still assume an average growth rate of 2.5% for 2023, we expect it to slow to 1.2% next year.