The significant uncertainties of all kinds that currently exist mean that forecasts for the progress of the economy and inflation are subject to significant revisions (up or down) on an almost constant basis. Whether or not the materialization of some of these risks is included in the calculation significantly modifies the final result. The figures on the future of the Gross Domestic Product (GDP) in Spain are an example of this.
Once again, and it usually happens every quarter, The technicians of the Bank of Spain have revised, this time upwards, their economic growth forecasts for this year and also on the foreseeable evolution of the inflation rate.
The reason for the adjustment of The June forecast compared to March has to do, according to the bank, in turn with the upward review that the National Institute of Statistics (INE) has carried out on what had happened in the second part of last year and, above all, the “surprise”, in the words of the general director of Economy and Statistics, Ángel Gavilán, which represented the strong difference between what the Bank of Spain expected to happen in the first quarter
Once again, and it usually happens every quarter, The technicians of the Bank of Spain have revised, this time upwards, their economic growth forecasts for this year and also on the foreseeable evolution of the inflation rate.
The reason for the adjustment of The June forecast compared to March has to do, according to the bank, in turn with the upward review that the National Institute of Statistics (INE) has carried out on what had happened in the second part of last year and, above all, the “surprise”, in the words of the general director of Economy and Statistics, Ángel Gavilán, which represented the strong difference between what the Bank of Spain expected to happen in the first quarter of the year (a 0.4% increase in GDP) and what the INE estimates happened: seven tenths of an increase.
These two reasons are what have moved the bank to raise the growth rate for the year as a whole. from the 1.9% they thought would happen three months ago to 2.3% what they consider now.
The new figure is relatively conservative, since other research services understand that GDP will grow above it for the same reasons. But the Bank of Spain thinks that, for example, despite the strong growth of the tourism sector that is taking place in these months, It will not be able to maintain the current line of progression for long and this will have an impact on what happens in the coming quarters.
In any case, in addition, those responsible for the monetary authority continue to consider that the existing geostrategic uncertainties may end up negatively influencing the evolution of economic activity, along with possible turbulence in financial markets and the reactivation of European fiscal ruleswhich should force administrations to make a relevant fiscal effort.
The truth is that, for some time now, as a consequence of different unexpected factors (Covid, invasion of Ukraine by Russia, conflict in Gaza, trade tensions between the US and China…) that take place, practically all analysis departments vary their forecasts each time they review them.
Unforeseen
It is precisely these uncertainties that force these revisionswhich, being so common, can cause distrust in the quality of analysts when approaching in advance what will really happen.
He fear of this loss of trust was what led, for a short period of time, to the fact that instead of giving a specific figure, what was offered was an oscillation band or the presentation of more than one alternative depending on whether some of the risks that are foreseen, but that are difficult to quantify, materialize with greater or lesser intensity.
It was not so long ago that the main analysis centers limited themselves to making public a single projection of what they expected to happen in the current year, which was then contrasted with reality when the year had expired and what had happened was known.
But the emergence of unexpected problems, the influence of growing globalization and, therefore, the rapid transfer of a distant problem to the near reality forced us to have to update the figures more often to try to understand what was happening.
Quarterly updates
It was a few years ago, with Luis María Linde as governor of the Bank of Spain, between 2012 and 2018, and Pablo Hernandez de Cos as general director of Economics and Statistics (known as the bank’s research service), when it was decided stop publishing a single macroeconomic projection per year and communicate it quarterlyso that the figures provided were adapted to the changing reality.
Along with the desire to present an approach more in line with what was happening throughout the year, there was another more circumstantial cause. A business school prepared a ranking on the degree of success that the different institutes, public and private,s, they had when it came to approximating their forecasts to what was later reality.
As The Bank of Spain only published a projection at the beginning of the year and the other analysis institutes updated theirs from time to time, it seemed that it was the public entity that was furthest from the final figure. because the specific moment in which they had been published was not taken into account.
