Spain no longer EU country with highest economic growth

by Lorraine Williamson
economic growth - IMF

MADRID – The International Monetary Fund has cut Spain’s expected economic growth this year by 0.5% to 5.7%. For 2022, however, the forecast has been revised upwards; The IMF expects economic growth of 6.4% next year. 

With this delayed economic recovery, the IMF is correcting the Spanish government’s optimistic forecast. It is the first time that an international institution has revised its forecast for the economy in Spain downwards, after statistics agency INE registered a sharp negative correction to growth figures in the second quarter in September. 

Spanish government is too positive 

Gross domestic product (GDP) grew no more than 1.1% in the second quarter.  Whereas the INE forecast growth of 2.8% at the end of July. The IMF’s forecast for the recovery in 2021 (5.7%) is far from the 6.5% that the Spanish government is counting on and on which it has prepared the national budget. 

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Globally, the economic recovery is experiencing setbacks due to a combination of factors. Firstly, there remains uncertainty about the arrival of new virus variants. Also, the vaccination process in non-Western countries is very difficult. Furthermore, there is a shortage of stocks and raw materials, rising inflation, and climate change has also made an impact. 

Italy and France have overtaken Spain 

With the IMF’s new forecast, Spain is no longer the country in the eurozone with the largest economic recovery. Last year, Spain experienced an economic contraction of more than 10%, making it (along with Andorra) the hardest hit EU country. Because the IMF has revised the forecast for Italy and France upwards, these countries have now overtaken Spain. Spain also lags behind on a global level: the global economy grew 0.2% more this year than in Spain, while the GDP contraction in Spain last year was three times greater than the global average. 

Employment next year not yet at old level 

Employment in Spain is showing an upward trend, but it is still far from the level of 2019. Despite the fact that the Spanish government was able to keep many jobs with the work protection mechanism ERTE, the IMF does not expect the pre-pandemic level to be reached in 2022 either. . The forecast for 2021 is an unemployment rate of 15.4%, which will improve to 14.8% by 2022. In the last quarter of 2019 this was 13.78%. With these figures, Spain remains the EU country with the highest unemployment rate. 

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