Mapfre Economics increases the growth forecast for Spain to 1.7% in 2023

MADRID, 18 Abr.

Mapfre Economics increases the growth forecast for Spain to 1.7% in 2023


Mapfre Economics, the insurer's Research Service, has raised the growth forecast for Spain to 1.7% in 2023, compared to the 1% forecast at the beginning of the year, growth driven by the moderation of energy costs and the standardization of production chains, the firm has reported.

In addition, Spain would not register a contraction in any quarter thanks to the recovery of net exports and a reasonable behavior of consumption despite inflation and high financial costs, which would also lead to exceeding the production level prior to the pandemic this year .

The report 'Economic and sectoral panorama 2023: prospects for the second quarter', published by Fundación Mapfre, highlights that Spain is comparatively better than other European economies. Inflation, although it benefits from base effects, will not experience a more definitive relief until the energy problem is resolved, while the higher financial costs could also end up having an impact on the prices of goods and services.

In March, the CPI stood at 3.3%, although underlying inflation continues to rise, standing at 7.5%, which indicates that economic agents have transferred the higher costs of their inputs to finished products.

Regarding the risks for the Spanish economy, the recent episode in the banking sector has been calmed to a certain extent by the intentions of the European Central Bank (ECB) to act with the necessary tools to avoid liquidity tensions, while remains committed to fighting inflation.

The markets are now contemplating a lower terminal level in interest rates, and what seems clear is that the central banks themselves are going to monitor their liquidity levels more closely. This will result in stricter credit conditions.

The tightening of financial conditions will reduce demand levels in the euro area, and could also have the undesired effect of restricting supply, although with a view to the first two quarters of 2023, the outlook has turned more positive than expected a few months ago, with some indicators improving due to the visible drop in energy costs and some normalization of the production chains.

Mapfre Economics anticipates growth for this year of 0.6% for the region. The United States, for its part, will grow 1% this year and enter a recession in the first quarter of 2024, a slowdown that is beginning to be noticed in many sectors. Asia will continue to act as a counterbalance compared to the developed economies, thanks to the still positive external demand that allows production levels to be kept high, inflation that remains contained and the reopening of China, the effect of which will probably generate positive synergies

The report includes an analysis of how the economic environment will affect the performance of the insurance sector. The Mapfre Economics experts explain that the better performance of the variable income indices this year, after the falls experienced in 2022, can help the development of life insurance products in which the policyholder assumes the investment risk, the which can also take advantage of the greater profitability offered by fixed income in the combination of products that are launched on the market.

The automobile sector is showing clear signs of improvement due to the normalization of supply chain problems, which is why the outlook for the business and profitability of auto insurance has improved, although financing conditions have tightened of the acquisition of new vehicles may weigh on the business in the coming months.

The environment of high interest rates derived from restrictive monetary policies will continue to be an additional stimulus for the life insurance business linked to savings, and the lower inflation, the good behavior of exchange rates in certain markets (such as Brazil and Mexico) and high interest rates can help improve the profitability of the insurance sector in 2023, after the complex year experienced in 2022.