The Organization for Economic Cooperation and Development (OECD) has improved its economic growth forecast for Spain during 2023 from the 2.1% predicted in June to 2.3%. This is reflected in its latest economic estimates report, which also indicates that inflation will fall from the average 8.5% in 2022 to 3.5% this year, four tenths more than in the organization’s previous calculation.
With this review, the OECD projects a better scenario for Spain than that foreseen by the Government itself, which predicted economic growth of 2.1% at the end of last year, and aligns itself with the Independent Authority for Fiscal Responsibility (Airef) and the Bank of Spain –2.3% both. However, it is still more cautious than the International Monetary Fund, which predicts 2.5%.
This new estimate, however, does not take into account the latest review of the National Institute of Statistics (INE), which reviewed yesterday, Monday, an increase in the growth of the Spanish GDP in 2022 compared to 2021 by three tenths, from 5.5% to 5.8%. , and improved nine tenths in 2021, up to 6.4%. These new calculations could generate a carry-over effect that would raise the OECD projection.
Be that as it may, Spain will once again be the large euro economy that will grow the most in 2023, ahead of France (1%), Italy (0.8%) and Germany (-0.2%). It would also improve economic growth in the eurozone, which would be 0.6%, compared to the 0.9% forecast in June. However, if the forecasts are met, the national GDP will expand at a slower rate than the world GDP (3%) and the G-20 (3.1%).
Looking ahead to 2024, the OECD has decided to keep its growth forecast for Spain unchanged at 1.9%. It would thus once again be the large European economy that would advance the most, although with a smaller margin over France, which would add 1.2%; Germany, which would rise 1.9%; and Italy, which would gain another 0.8%.
Inflation
The organization’s report does not include direct mentions of the situation in Spain, but it does warn of a loss of economic growth momentum in the second part of the year at a global level. Regarding inflation, the OECD predicts that it will moderate to 3.5% this year, and then rise another 3.4% during the following year, half a percentage point less than in the previous projection.
As in terms of economic growth, Spain would be at the forefront when it comes to facing the rise in prices of the last year and a half, since Germany, France and Italy will register average inflation rates of around 6%. However, it would be the large euro economy with the highest annual inflation in 2024, above the 3% that these countries would register.
Underlying inflation
Regarding core inflation, which excludes energy and unprocessed food, the report recognizes that it will decrease “more gradually.” In line with the other large European economies, Spain will close the heading this year with an average increase of 4.4%, which will moderate to 3% in the following year.
Rate hike
At this juncture, the OECD argues that “monetary policy should remain restrictive until there are clear signs that underlying inflationary pressures have been durably reduced, short-term inflation expectations are further moderated and excessive pressures are subdued.” . “resources disappear in labor markets.”
He sees it as “likely” that these conditions limit the possibility of starting a path of reducing interest rates “until well into 2024 in most advanced economies” and, in fact, he considers that “some additional increases could still be necessary.” . However, the report admits that rates “appear to be at or near their peak in most economies.”
fiscal policy
Finally, in terms of fiscal policy, the OECD insisted on “more intense near-term efforts to rebuild fiscal space and ensure debt sustainability” to meet fiscal consolidation objectives and “respond effectively to future shocks.” .
In this sense, he once again urged to eliminate “many” of the fiscal support measures approved in recent years, including energy aid, “and better target them towards those most in need, particularly vulnerable households that are not adequately covered by existing social protection systems.”
