The International Monetary Fund (IMF) has positive expectations for Spain. The organisation has increased its growth forecast for the Spanish economy in 2024 by half a percentage point to 2.4%. For 2025, the forecast remains unchanged at 2.1%, as for 2026, the IMF said after their visit to Spain under Article IV.
The IMF highlighted the “solid and sustained” performance of the Spanish economy in 2023, which grew by 2.5%. Spain showed “remarkable resilience” despite global uncertainties and tightening financial conditions. Strong exports of services and government consumption have proven to be important growth drivers. The labour market also achieved good results thanks to the influx of immigrants and rising labour participation.
Low productivity growth and high unemployment
Despite recent improvements, investment remains below the level at the end of 2019. This contributes to low productivity growth. Although unemployment has fallen significantly, Spain continues to have the highest unemployment in the Eurozone.
Also read: May unemployment in Spain at lowest since 2008
Inflation
Overall inflation has fallen significantly since its peak in 2022. This is partly due to the decline in energy prices that feeds into food prices and non-energy industrial goods. The IMF expects the Spanish economy to grow by 2.4% in 2024, mainly due to stronger domestic demand. Private consumption will increase as household savings rates normalise and real wage growth continues. Furthermore, private investment will benefit from easing financial conditions and the disbursement of Next Generation EU (NGEU) funds.
Political Fragmentation
Although the outlook is stable, risks to growth remain negative and risks to inflation remain positive. Political fragmentation, insufficient use of Next Generation EU funds, a global slowdown and geoeconomic fragmentation could hinder growth. Energy price fluctuations and rising labour costs can increase inflation.
Tax consolidation
The IMF emphasises the need for sustained fiscal consolidation and reforms to promote economic resilience. This includes an explicit medium-term fiscal plan, more efficient tax collection and expansion of the tax base. Also, extraordinary taxes on banks and energy companies must be carefully designed to minimise disruptions and make pensions sustainable.
Labour market and housing
The IMF calls for reducing the duality of the labour market and better integrating labour market policies. New initiatives must be carefully designed to avoid negative effects on employment and growth. In addition, optimising the use of European funds is crucial, as is improving housing supply to increase affordability.