Thus, the Banco de España’s latest macroeconomic projections described a scenario of weaker momentum in activity and greater inflationary pressure than in the previous December 2021 projections. Specifically, the projections envisage that GDP will grow by 4.5% in 2022, 2.9% in 2023 and 2.5% in 2024. In the area of prices, the April projections pointed to an average rate of change of 7.5% in the HICP in 2022. Inflation is expected to then drop sharply to 2% and 1.6% in 2023 and 2024, respectively. It should be stressed that this sharp slowdown is based on two assumptions. The first is that there will be a slowdown in the growth of energy prices, in line with those on the futures markets. The second is that a moderate wage growth response and a squeezing of trade margins will prevent the emergence of the price-wage feedback loop. The economic outlook is, in any event, subject to a very high level of uncertainty. In fact, the information that has become available since these projections were published would, in the absence of further shocks, point to a new downward revision to GDP growth in 2022, due to developments in Q1 being more unfavourable than expected. As regards inflation, the new data suggest higher growth in the non-energy component, along with strong growth in the energy component, albeit somewhat more modest than expected in April.
Regarding incomes policies, based on the findings of the assessments required by law, further adjustments must be made to the conditions governing eligibility for Spain’s minimum income scheme (MIS), to ensure that this instrument can effectively fulfil its mission of eradicating extreme poverty while avoiding undesired effects. To that effect, social security authorities have recently signed agreements with several research institutions in order to evaluate social inclusion itineraries linked to the MIS. Housing affordability has tightened in recent years. According to Eurostat data, 48.7% of Spaniards living in market-price rented accommodation in 2020 were at risk of poverty or social exclusion, the highest rate in the European Union (where the average stands at 32.3%), while 35.9% devoted more than 40% of their disposable income to housing, versus the EU average of 25.8%. The Draft Law on the right to housing seeks to ease such difficulties, which hit the young and lower-income households particularly hard. However, some of the measures envisaged, such as rent control, may not have the desired effect or may even have adverse effects in the medium term. Conversely, certain measures that could give a significant structural boost to the supply of rented housing, such as offering greater effective legal certainty to landlords, are absent. 17  (iv) The challenge of increasing firm size, facilitating cross-sector reallocation and fostering innovation Another major challenge is the small size of businesses, which results in less innovation and low productivity.