A brief overview of Banco de España Annual Report 2021 and of most recent macroeconomic projections for the Spanish economy

Abstract

Inflation has continued to accelerate in recent months mainly driven by energy and food, but also by the rise in underlying inflation leading to continuous upward revisions of the inflation rates projected by the analysts’ consensus, for both the Spanish and global economies. The entry into force of the Iberian mechanism to cap gas prices and reduce electricity bills will exert downward pressure on the energy component of inflation in the coming months. However, the inflation paths for food and the underlying component for the period 2022 2024 are revised up significantly. Although the current inflationary episode is projected to gain in intensity and persistence, the recent high inflation rates are expected to moderate in the coming quarters, in line with commodity prices on futures markets and the gradual reversion of some of the factors that have triggered the Price hikes (i.e. bottlenecks). Duration and intensity of the war in Ukraine (commodity prices, bottlenecks, etc. Materialisation of significant indirect and second round effects.