According to the annual review of the Spanish economy, known as ‘Article IV’, the IMF believes the impact of the European funds will increase the GDP growth forecast for 2021 to 7.2%. This compares with the previous estimate of 6.3% made in June. The final forecasts will be made known in October, when the institution will publish its biannual ‘World Economic Outlook’.
Bankia Estudios | None of the world’s major economies will avoid an annual contraction in GDP, with the possible exception of China, which could grow by a modest 1%, reported the institution. As for the Spanish economy, it has cut forecasts from the -8% estimated in April to -12.8%. For 2021, it estimates 6.3% growth , so that next year the level of GDP will still be 7.3% lower than in 2019 (4% in the previous revision). Spain’s worse performance is mainly due to the heavy weighting of tourism sector in GDP.
The IMF points to a recessionary situation in both developed and emerging countries, during the “Great Lockdown”, as it has named the current crisis. This did not occur in 2009 Great Recession as the emerging countries then acted as a lifeline by growing by 2.82%. Also, the international organization projects that per capita growth will contract in more than 170 countries.
The European Union lived an intense day on Tuesday. UK agreed on deal with the EU, but now the question if it will pass the test. Also Italy announced no changes in budget, while the IMF showed a cautious view. Further confrontation ahead between Rome and Brussels is expected. As commented by analysts at Julius Baer, “the EC is trapped in a philosophy of austerity whilst the Italian government is committed to fulfilling the election promises of a fiscal boost.”
The situation in Turkey is a good example of the negative consequences of stances which call into question the independence and credibility of the central banks. Currently, the deteriorating credibility of Turkey’s institutions make it fairly difficult for actions like the increase in rates (last week they were raised by 300 bp) to attract capital flows.
J.L.M. Campuzano (Spanish Banking Assocation) | We are echoing the IMF’s recent report on the evolution of the European economy. All of Europe is seeing growth, but this has dynamic has to be supported by structural reforms which boost potential growth and best financing to achieve this.
President of Argentina, Mauricio Macri, has not taken long to see the writing on the wall: he has officially asked for help from the IMF. On Monday, the peso/$ devalued 5%, which is a savage drop. Domestic and foreign equity have completely lost confidence in the economic governance and have fled terrified, with huge losses, given the peso’s accumulated depreciation.
The International Monetary Fund (IMF) has revised its growth estimates upwards for the Spanish economy for the next two years, so Spain is now the European country which is growing the most, and number two amongst the developed markets, after the US.
The IMF is forecasting global growth of over 3.9% in 2018. For the Eurozone, the forecast is for growth of 2.2%. The fifth year of economic expansion, confirming sustained and diversified growth. And the Washington-based organisation is calling for greater integration in the euro area.
What was a surprise in the IMF’s updated growth estimates was the correction made to the growth forecast for Spain this year (-0.1 pp to 2.4%) given “the impact of greater political uncertainty on confidence and demand.”