The IMF Raises Spain’s Growth Rate for 2024 to 2.4%

Spain leads Europe. The Spanish economy will grow by 2.4% this year, according to the new forecasts of the International Monetary Fund (IMF), which has revised its previous estimate for Spain upwards by half a percentage point, thus making it the major European economy with the best prospects for expansion.

Looking ahead to next year, the Washington-based institution has kept unchanged its forecast from last April of Spain’s GDP growth of 2.1% , which would keep the country at the forefront of the recovery in Europe.

The IMF’s new forecasts thus coincide with the GDP growth projection for 2024 announced by the Government on Tuesday and are one-tenth below the 2.2% forecast by the Executive for 2025.

The revision of Spain’s growth outlook is part of the update of forecasts published on Tuesday by the IMF, which has kept its growth forecast of 3.2% for the global economy this year unchanged , but has improved its estimate for 2025 by one-tenth to 3.3%.

The IMF has maintained its growth forecasts for Spain, which coincide with those announced by the Government

Among advanced economies, the institution maintains its expectation that growth will increase by 1.7% this year and 1.8% next year , despite revising downwards by one-tenth the expansion forecast for the United States in 2024, to 2.6%, while reiterating its growth forecast of 1.9% for 2025.

In the case of the Eurozone, the new IMF projections foresee a GDP expansion of 0.9% in 2024, one-tenth more than expected in April, and maintain the forecast for 2025 at 1.5%.

Specifically, Germany will grow by 0.2% this year and 1.3% in 2025, in line with expectations, while France sees its expected expansion for 2024 improved by two-tenths to 0.9%, but cuts its 2025 growth by one-tenth to 1.3%. In the case of Italy, the IMF forecasts an expansion of 0.7% this year and 0.9% next year, which represents an improvement of two-tenths in 2024 and keeps its previous forecast for 2025 stable.

The Spanish economy will grow by 2.4%, compared to 0.2% and 0.9% for Germany and France, respectively

Among emerging economies, the institution anticipates GDP growth of 4.3% this year and next, thus improving by one-tenth its respective forecasts from last April, after improving by four-tenths for each of the years its forecasts for China, with growth of 5% in 2024 and 4.5% in 2025.

The IMF projections have taken into account upward revisions to commodity prices, including a less pronounced than previously estimated fall in energy commodity prices, reflecting high oil prices in the face of deep OPEC+ (Organization of Petroleum Exporting Countries) cuts and price pressure from the Middle East conflict.

On the other hand, the institution continues to expect interest rates of the main central banks to decrease in the second half of 2024 , although it stresses that the divergence in the pace of normalization will reflect the different inflationary circumstances.

Overall, the IMF views risks to the outlook as balanced, although it warns that some near-term risks have gained importance , including upside risks to inflation stemming from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.

IMF expects central banks to lower interest rates in 2024

“Escalating trade tensions could further increase near-term risks to inflation by raising the cost of imported goods along the supply chain,” the report said.

It also warns that “the misuse of inward-looking and domestically-oriented policies compromises the ability to address global challenges” such as climate change, for which multilateral cooperation and trade are vital.

These policies are also often inadequate to address domestic issues, as they increase fiscal pressures and risk further distortions , such as misallocation of resources.

“Therefore, all countries should reduce the use of trade-distorting measures and instead strive to strengthen the multilateral trading system,” he concludes.

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(Featured image by Jorge Fernandez Salas via Unsplash)

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