MADRID (Reuters) – Spain’s economy grew in the third quarter at a pace similar to the previous one thanks to solid domestic demand and looser COVID-19 restrictions, the Bank of Spain said on Tuesday, raising its forecasts for 2021 and the next two years.
In the third quarter, the Bank of Spain expects gross domestic product to grow 2.7% after rising 2.8% in the April to June period as the economy was facing some challenges in the short-term, as seen in car and retail sales, its chief economist, Oscar Arce, told a press briefing.
After a record 10.8% slump last year, the central bank expects gross domestic product to expand 6.3% in 2021, up from a 6.2% forecast in June.
The central bank forecasts came just after Economy Minister Nadia Calvino said that GDP was likely to recover to pre-pandemic levels by the end of this year, as she maintained previous growth forecasts for this year and the next.
Speaking at a news conference, Calvino maintained the economic growth targets of 6.5% for 2021 and 7% for 2022 and added that GDP would likely be higher in the first quarter of 2022 than in the first quarter of 2019.
The central bank meanwhile raised its forecasts to 5.9% for next year, from a prior 5.8%, and to 2.0% for 2023, from 1.8%, with the central bank expecting the Spanish economy to recover to pre-pandemic levels during 2022, instead of by the end of next year.
The central bank cited continued support from fiscal and monetary policies as being among factors underpinning this outlook while it was also expected to benefit from a reduction of high public debt levels and from the implementation of European funds.
At a time of soaring consumer prices both in Spain and elsewhere in the euro zone, the central bank said it expected a recent inflation hike in Spain to be temporary and to gradually slow down in coming quarters.
However, the bank did not rule out additional and potentially longer-lasting price hikes, triggering second-round effects, with the inflation expected to peak in November.
In its forecasts, the Bank of Spain said it expected Spain’s EU-harmonized consumer inflation to rise to 2.1% this year from a previous forecast of 1.9% in June before falling to 1.3% in 2023.
(Reporting by Jesus Aguado and Emma Pinedo; additional reporting by Belen Carreno and Inti Landauro; Editing by Alison Williams and Steve Orlofsky)
