The International Monetary Fund (IMF) has significantly raised its GDP growth forecast for Spain in 2022, which rises to 5.2% from 4.6% last November, although it has cut the projection by one tenth for this year, when it expects an expansion of 1.1%, according to the projections included in the conclusions of the consultations for the ‘Article IV’ report on the Spanish economy.
According to the international institution, the slowdown in growth projected for Spain in 2023 compared to last year “reflects the effects of high energy and food prices, tighter financial conditions, and higher external demand.”
In this way, the IMF anticipates that activity will reach its pre-pandemic level at the beginning of 2024, when it expects GDP to grow by 2.4% and at a rate of 2.2% in 2025. Regarding inflation, The institution calculates an average rise in prices in 2022 of 8.4%, which will moderate this year to 3.7% and 2.7% in 2024, standing at 2.1% in 2025.
However, taking into account the data at the end of the year, for 2022 it estimates inflation of 5.8%, which will drop to 3.8% at the end of 2023 and to 2.4% a year later, to stand at 2%. at the end of 2025. Likewise, the IMF expects that the unemployment rate, which stands at 12.8% in 2022, will remain stable in 2023, falling to 12.5% next year and up to 12.3% in 2025.
On its side, public debt will be 112.1% of GDP in 2023, after closing 2022 at 112.8%, to drop to 110% next year and to 109% a year later. The executive directors of the IMF praised the economic resilience of Spain and the solid performance of the labor market in the context of successive ‘shocks’, collects the document published by the entity.
However, the outlook is noted to be subject to great uncertainty given Ukraine’s vulnerability to war spillovers, weaker global demand, tighter financial conditions and high energy prices.
In this context, they underscored the importance of carefully calibrated and flexible macroeconomic policies, as well as a strong implementation of the structural reform agenda to support sustainable and inclusive growth.