Hernández de Cos' warning: salaries will not recover the lost purchasing power at least until 2026

Spanish salaries will not recover, at least until 2026, all of the purchasing power they lost during the past year, a year in which inflation shot up to an average of 8.4% and salary increases were practically nowhere to be found. case, at that level. This is the opinion of the governor of the Bank of Spain and member of the Governing Council of the European Central Bank (ECB), who yesterday participated in the annual meeting of the International Monetary Fund (IMF) and the World Bank in Marrakech.

“In 2025, in the euro zone as a whole, what was lost during 2022 will have been recovered, but in Spain that recovery will not yet be complete,” Hernández de Cos confirmed to this newspaper after speaking in a massive session.. It was one of the appearances that attracted the most attention of the day, the room was small and there was even an unusual and striking request for photographs by some of the attendees, a sign of the respect and influence of which the governor of the Bank of Spain enjoys in the European and global economic sphere.

Hernández de Cos explained that this recovery of purchasing power will occur, first, because salaries will be “more dynamic.”. In parallel, there will be a gain in productivity because companies are not laying off their workers even though there is a certain drop in their activity.. The reason is that they think that this stoppage will be momentary and when the workload returns to its normal level, something that will likely happen next year, they will already have the necessary workforce and will not have to hire. The result: “Productivity will come ahead of employment.”

Furthermore, his estimate is that inflation will be reduced to levels close to 2%, and to this the head of the BdE added the business margins, which will also favor the process.. With all this combination of factors, Hernández de Cos highlighted that date of 2025 as the moment when the catch up will occur in the euro area. In Spain, on the other hand, we will still have to wait three years to reach that point.

The governor also analyzed the possible monetary policy measures that the ECB will take in the coming months in its fight against inflation.. “Today I can be even more confident that the current level, if maintained for a long enough period, will be sufficient,” he said.. That is, it considers that no further interest rate increases will be necessary.. Although this assessment, he added, is “conditioned by the information currently available”. “Uncertainty is very high and it cannot be ruled out that new disturbances may occur to which we would have to respond,” he warned.

Hernández de Cos's intervention occurred on the same day that the first vice president of the Government, Nadia Calviño, held a meeting with the Spanish media present at the IMF week. The Minister of Economy, in addition to expressing her concern about a possible escalation of violence in Gaza that adds uncertainty at a time of global economic slowdown, wanted to highlight Spain's growth figures.

The Vice President of the Government, Nadia Calviño, talks with the Managing Director of the IMF, Kristalina Georgieva. EFE

The Fund has confirmed this week that the Spanish economy will grow the most within developed countries. No other country will match the 2.5% rebound estimated for this year or the 1.7% projected for 2024. But this second figure is, at the same time, three tenths lower than what the IMF estimated in July. In other words: that the slowdown that is looming over the world economy will also affect Spain.

The organization warns that global growth prospects are the worst in “decades” and that the international economy “is limping, not running.”. “More than 80% of economies have experienced a slowdown in their growth prospects compared to 15 years ago,” added the organization headed by Kristalina Georgieva.. The Vice President of the Government, however, insisted that Spain is even recovering “the trend it had before the great financial crisis”, and that in the coming years it will “converge” with developed countries and those with higher incomes.

Regarding his objective of presiding over the European Investment Bank (EIB), he stated that there is no news or meeting planned, but that his candidacy is “firm.”. And regarding the anti-inflation measures that expire at the end of the year, the vice president pointed out that no decision has yet been made.. Which will be taken during the process of preparing the General State Budgets (PGE) for 2024, a document that the Ministry of Finance is sure of being able to present in the first weeks of January despite the fact that, for now, the acting president, Pedro Sánchez does not even have enough support to carry out his investiture.

The IMF, however, considers that it is essential that these actions are not renewed beyond December 31, which is the date on which they expire.. The organization estimated, also this Wednesday, that Spain's deficit will be 3.9% this year and 3% next year. Until now, the agency's figures were 4.5% and 3.5%, respectively. That is, there is a reduction of six tenths this year and five tenths for the next, and in this process the review of growth carried out by the National Institute of Statistics (INE) has been fundamental.

This means, in any case, that the IMF endorses the promise that the Government made to Brussels, by which it would reduce its deficit to 3% next year.. And not only that, but it would meet the limit of those same three points of GDP that are established in the fiscal rules that will be active again from January, so that Spain would not be forced to be under the tutelage of the EU. to reduce its deficit. But to do so, the organization assumes that these actions against the price crisis will not go beyond the end of 2023.. And, furthermore, the Fund anticipates that in 2025 inflation will rise again, up to 3.4%, and will remain there in the medium term, so additional actions will be necessary to curb the budgetary deviation.

The debt estimate is also lowered since, with the same level of debt and a higher GDP as a result of the aforementioned Statistics review, the relative data is logically reduced. Thus, public liabilities will be 107% this year and 104.7% next year.. The figures so far pointed to 110% and 108%.