Estimated GDP growth Spain three times higher than eurozone

by Lorraine Williamson
Spain´s economic growth
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Economists at the International Monetary Fund, IMF, think Spain’s GDP will grow by 2.5% this year and 2% in 2024. Both figures are above the average of the eurozone (0.9% and 1.5%) and major European economies. This is according to an IMF report published on Tuesday.  

The organisation also points out in the paper that governments can help central banks in their fight against inflation by cutting public spending or raising taxes.  

Among major institutional analysts, the IMF gives the most optimistic forecast for Spain. Its forecast of 2.5% exceeds forecasts by the Bank of Spain (2.3%), Airef (2.3%), OECD (2.1%) and the European Commission (1.9%). The forecast is even higher than the government’s own forecast for this year’s general state budget.  

The IMF raised the growth forecast for this year by one per cent from its previous forecast published in April. In doing so, the IMF joins the consensus of analysts, who have upgraded their forecasts for Spain in recent months. This was after macroeconomic data provided positive surprises. The resilience of the labour market, the strong recovery in tourism and a statistical revision by the INE of last six months’ growth figures have boosted expectations for 2023.  

Spain’s economy ministry points out that the country has received “one of the largest upward revisions”. Spain will show, among the major developed economies, the highest growth in 2023 and 2024. GDP growth will be almost three times the estimated growth rate for the eurozone (0.9%). 

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First signs of weakness visible 

However, several analysts – including those at the Bank of Spain – are already warning that the Spanish economy is starting to show signs of weakness. In June, employment figures showed that job growth has stagnated. High interest rates continue to burden households, the recovery in the tourism sector is starting to fade, and high-frequency indicators such as the PMI, the Purchasing Managers Index, point to an incipient slowdown in growth. 

The global economy 

The IMF forecasts a moderate slowdown in global economic growth of 0.5% in 2023. In the eurozone, the slowdown is more impressive. According to the IMF, eurozone countries go from 3.5% growth in 2022 to 0.9% in 2023. Then growth pulls back to 1.5% in 2024. High interest rates are stifling households around the world, the risk of financial turbulence -such as after the collapse of Silicon Valley Bank and Credit Suisse last spring- remains. 

Inflation still historically high 

Central banks continue to struggle to control inflation, which is still at historically high levels, but prices are holding up better than expected. The IMF now thinks core inflation will fall more slowly than expected, especially in advanced economies, and has revised upwards its global inflation expectations for next year. Beating inflation is the IMF’s top policy priority. The institution therefore recommends central banks to be relentless in their fight against inflation and not give in to the temptation to cut interest rates prematurely. However, the IMF does tip “to cut government spending or introduce tax increases to ensure debt sustainability, in the fight against inflation. 

Also read: Spain will grow faster than the US or Germany in the coming years

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