IMF Raises Spain’s GDP Growth Forecast for 2022 to 4.6%

The International Monetary Fund (IMF) raises its forecast for Spain. The body led by Kristalina Georgieva has raised its growth forecast for the Spanish economy for 2022 by three-tenths, to 4.6%, as reported by the fund in the revision of its annual forecasts published on Wednesday, November 23rd.

The entity has maintained its forecast for Spanish Gross Domestic Product (GDP) growth for 2023 at 1.2%, although it has warned that growth in the coming quarters will be “relatively weak” and could even approach zero at the end of this year and early 2023. However, the IMF has ruled out Spain’s entry into a technical recession.

Over the next two years, weak external demand and deteriorating consumer confidence will weigh on the Spanish economy’s growth. In addition, inflation will not slow to 2% in the next two years, while industrial production will reach pre-pandemic levels in 2024.

According to the agency, the Spanish economy will rebound in the course of 2023 and return to pre-pandemic levels in 2024, provided that supply problems dissipate, the Recovery Plan is implemented and energy prices do not continue to soar.

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The IMF has maintained its growth forecast for 2023 at 1.2%

However, the IMF notes that the outlook is subject to great uncertainty. “A sharper-than-expected slowdown in the global economy or a more pronounced tightening of financial conditions could change the forecast,” the agency has assured.

In terms of employment, the report positively assesses the labor reforms approved by the Spanish government in 2021, although it warns that it is too early to evaluate their definitive impact. At the same time, the fund warns that productivity growth in Spain is lower than that of the economies of the countries in the area.

Currently, Spain remains the only euro economy that has not returned to the level of activity prior to the pandemic. That happened because in 2020 it suffered the most intense fall in GDP of the advanced economies, due to its high dependence on sectors such as tourism and the hotel and catering industry.

The Bank of Spain‘s GDP growth forecast for next year is 1.4%, below the Government’s estimate of 2.1%. On the other hand, in October, the institution increased its growth forecast for this year by four tenths of a percentage point to 4.5%.

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