The projections published in June envisaged GDP growth of 4.1% in 2022, 2.8% in 2023 and 2.6% in 2024. Meanwhile, inflation of 7.2%, 2.6% and 1.8% was forecast for 2022, 2023 and 2024, respectively. In any event, the latest developments I referred to earlier point to a downward revision for economic growth in 2023 and an upward revision for inflation throughout the projection horizon, in line with those for the euro area. Thus, the latest Consensus Forecasts (relating to September) project 4.3% growth in Spain for 2022, holding stable relative to June, and 1.6% for 2023 (vs the 3.0% forecast in June). As for inflation, average rates of 8.8% and 4.1% are projected for 2022 and 2023, respectively, up 1.3 pp and 1.5 pp, respectively, on the June projections. The projections are surrounded by great uncertainty, with downside risks for activity and upside risks for inflation. In the near term, developments depend to a great extent on energy commodity prices. Possible interruptions in energy supplies and harsh winter weather could bring about further increases in energy prices and more severe production cuts than expected under the baseline scenario. Indeed, the ECB’s latest projections include a downside scenario that envisages slightly lower growth in 2022 and, in particular, a contraction in GDP of 0.9% in 2023, while maintaining the expected increase of 1.9% in 2024. Under this scenario, inflation will be even higher than under the baseline: 6.9% in 2023 and 2.7% in 2024.
The pattern is found throughout the animal world, in features as conspicuous as over-sized antlers and over-elaborate plumage.3 In many cases, these physiological features have evolved as a response to a competitive sexual race, a Darwinian tournament. Matthew Ridley calls this the Red Queen Race from the Alice in Wonderland scene in which “however fast they went, they never seemed to pass anything.4 As elephant seals, deer and peacocks can attest, it is a race in which, in their quest to win, the species as a whole may end up as loser. So nature can deliver an evolutionary equilibrium which is sub-optimal for its participants, a market failure. The more intense the competitive race, the greater this market failure or co-ordination problem. Elephant seals would prefer to co-ordinate on a lower-blubber equilibrium, deer on a shorter-antler equilibrium, peacocks on a smaller-tail equilibrium. Competition prevents them from doing so. If there were a benign, enlightened zoological planner, able to compel less-conspicuous features, this would benefit not only each animal but the species as a whole. Unfortunately, there is not. ************ These inefficient Darwinian equilibria are as common in social as in natural systems. Garrett Hardin’s 1968 classic Tragedy of the Commons uses the metaphor of individual herdsmen grazing their cattle on common land. “Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited.