The slowdown in growth rates of the last months of 2021 will continue in the new year marked by inflationary pressures, congested demand that aggravates bottlenecks or uncertainty due to Covid. This is what he has stated Mapfre Economics, the company’s Studies Service, which has lowered the growth forecast for Spain by seven tenths. Specifically, he hopes that the national activity grow 5.5% throughout 2022, compared to 6.2% that ventured in the previous quarter.
“Covid and its derivative effects are the main downward effects,” he explains. Gonzalo de Cadenas-Santiago, Director of Macroeconomic and Financial Analysis of the MAPFRE Studies Service, while warning of a inflation that although “is not permanent, is persistent”. High inflation is beginning to influence monetary and fiscal policy decisions, with a faster response in emerging countries. This leads experts to reduce forecasts for the world economy by one tenth, from 4.9% to 4.8% for this year.
The Spanish economy is affected by international factors with “special incidence” because, for example, the automobile sector is highly relevant to GDP – and vehicle production is at half its pre-Covid level, or tourism, which has only partially recovered and is also still at half its usual levels . Even so, de Cadenas-Santiago affirms that “the recovery remains sustained despite the pandemic” and highlights that growth is higher than the average of the last three years.
Regarding inflation, although the underlying one continues “at reasonable levels” (1.7%), they warn that its persistence “will be determined by second-round effects through salary and pension increases. The rise in wages, if not moderate, will reduce competitiveness to the economy for the future.
Added to the above factors are geopolitical risks, which have worsened in recent weeks due to the crisis in Ukraine. In addition, this risk is a key factor for the Spanish economy since the country is in the middle of the conflict between Morocco and Algeria. “Spain wants to be on good terms with Morocco and Algeria and both are at odds,” warns Cadenas-Santiago, who adds the impact of this scenario on the energy sector.
For the Eurozone as a whole, its growth was also lowered by four tenths, while for the US it has cut almost two points (4% compared to the previous 5.7%), given the change in the outlook for interest rates, together with the rise in the cost of energy and other raw materials. The central banks are already responding to the high inflation and from Mapfre Economics they explain that the increase in official interest rates that is anticipated in the US, “will affect the financial conditions of businesses and households.
Prospects for the insurance sector in 2022
Mapfre’s report also includes forecasts for the insurance sector and how the economic outlook affects it. Despite the slowdown in global growth, the experts at Mapfre Economics consider that the increased sensitivity to risk by economic agents caused by the pandemic is an additional stimulus in the demand for insurance, which continues to draw a positive outlook in 2022 for the development of the insurance business.
“The negative effects of the economic reopening on the accident rate of some insurance such as auto, life or health tend to be corrected, so the outlook for the profitability of insurance companies continues to be favorable, despite the effect that the rise in inflation in the short term“, they add.
In the specific case of Spain, the shortage of supplies will continue to slow down production levels in certain sectors of activity, such as the automobile industry. However, economists expect the situation to improve in the coming months, “which may help get the auto insurance business back that this situation has been suffering and that it may be generating a dammed up demand that would translate into greater growth in this line of business when the situation in this sector normalizes”.
In his opinion, the premiums for life savings insurance and traditional life annuities are still far from pre-crisis levels, despite more restrictive monetary policy measures, while the Life risk business may benefit from greater sensitivity to the risk of death of households and companies as a result of the pandemic.