Real GDP growth decelerated abruptly in 2022-Q1 (0.2% q-o-q) due to supply disruptions and the increase of inflationary pressures. Private consumption contracted significantly and is expected to remain under pressure during the forecast horizon, in a context of high inflation and weak consumer confidence. Nevertheless, quarter-on-quarter growth rates of GDP are expected to accelerate slightly in the next two quarters on the back of the return of tourism to pre-pandemic levels. Towards the end of the year, economic activity is projected to slow down again despite faster implementation of investments under the RRP, as households are expected to adjust their consumption decisions to higher prices and economic uncertainty.
Last update : Summer 2022 Economic Forecast (14/07/2022)
|GDP growth (%, yoy)||-10,8||5,1||4,0||2,1|
|Inflation (%, yoy)||-0,3||3,0||8,1||3,4|
Annual real GDP growth is forecast at 4.0% in 2022 and 2.1% in 2023. The gap with the pre-pandemic level of GDP is expected to be closed in the second half of 2023, when quarterly growth rates are set to regain dynamism. Compared to the Spring Forecast, changes in the outlook for 2023 are mainly explained by a more pronounced impact of inflation on households’ purchasing power, particularly at the beginning of the year, in a context of limited wage increases. The impact on private consumption will be partly cushioned by the unleashing of accumulated savings, the resilience of the labour market and indexation of pensions. In 2023, investment, under the impulse of the Recovery and Resilience Plan, is expected to be the main demand driver.
Annual HICP inflation is forecast to reach 8.1% in 2022 and 3.4% in 2023. Energy prices have been fuelling inflation pressures since 2021-Q2, and the pass-through effect to other goods (notably, food) and services (in particular, hospitality sector) has accelerated in recent months. Compared to the Spring Forecast, the persistence and intensity of this effect is the main reason behind the revision to the inflation outlook. Energy prices are expected to slowly moderate as from the second half of 2022, helped by additional government measures that entered into force in June, including the gas price cap aiming to reduce the wholesale electricity prices and a further reduction in the VAT on the electricity bill (from 10% to 5%). Core inflation is expected to remain high during 2022 and to start to ease in 2023-Q2, helped by base effects.