The IMF raises its growth forecast for Spain in 2022 to 5.2%, but lowers its forecast for 2023 to 1.1%. Thus, 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.
As for inflation, the institution estimates an average price increase in 2022 of 8.4%, which will moderate this year to 3.7% and 2.7% in 2024, reaching 2.1% in 2025.
In this regard, the IMF recalls that high inflation in 2022 was largely caused by rising energy prices and persistent supply constraints, highlighting its fall to 5.8% by the end of 2022 due to lower gas prices in Europe and the impact of energy support measures.
However, it warns that core inflation remains above 6% due to a gradual pass-through of higher energy costs to a wider range of prices and, possibly, declining spare capacity in the economy, although it stresses that wage pressures have been contained so far.
The IMF also expects the unemployment rate, which it puts at 12.8% in 2022, to remain stable in 2023, falling to 12.5% next year and to 12.3% in 2025. For its part, public debt will be 112.1% of GDP in 2023, after closing 2022 at 112.8%, falling to 110% next year and to 109% a year later.
IMF directors highlighted the “timely policy” of the Spanish authorities to help households and businesses deal with rising energy prices. On the other hand, they highlighted the improvement in Spain’s public finances since the pandemic and welcomed the moderately contractionary fiscal stance envisaged in the 2023 budget.
In this regard, they emphasised that in the coming years “gradual and sustained fiscal consolidation”, backed by a medium-term consolidation plan, will be necessary to create space to respond to future shocks, while noting the importance of taking additional measures to preserve the sustainability of the pension system.
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