Heads and tails of the IMF for Spain. IMF doubts about the measures implemented by the Government to combat the rise in inflationwhich stands at 4.3% at the end of the year -four tenths more-, but an improvement in the GDP growth forecast to 1.5%, four tenths more. The International Monetary Fund thus revised upwards the projections it made at the beginning of the year, at which time the anti-inflation plan launched by the Executive came into force, however, it continues to assess downward the momentum of the next two years, projecting a growth of 2% in 2024, four tenths less compared to what was thought in January, and one point lower compared to October. Although both figures continue to be above the average for the euro zone -which will grow 0.8% this year and 1.4% next year-, it maintains a downward trend in anticipation of possible consequences of an economic slowdown and the persistence of high inflation.
This growth in Spain, estimated by the organization led by Kristalina Georgieva, is in line with the latest Bank of Spain projections of 1.6% this year, but very far from the optimism presented by the economic minister, Nadia Calviño, who expects growth of 2.1% this year. A figure that for the IMF denotes a certain economic slowdown in Spain and the euro zone, since the world average will stand at 2.8%, despite the context of “sharp slowdown” in the most developed economies (1.3% in 2023), offset by the growth of emerging companies (3.9%). “We start from the assumption that the global economy is recovering from the pandemic and assimilating the effects of the war in Ukraine,” said the IMF’s director of research, Pierre-Olivier Gourinchas, who acknowledged that the outlook could worsen due to the ” financial turmoil of the last month and a half”, which could result in “a more pronounced and elevated slowdown if financial conditions worsen significantly,” he said.
Although the IMF does not make direct reference to the reasons why it has decided to modify its forecasts for Spain, it does point out that “the gradual recovery” of the economy is maintained, thanks to the improvement in the functioning of supply chains and the “reversal of dislocations” in the energy and food markets, a situation that he predicts will lead the economy to “bottom out” this year. However, puts the focus on the danger of inflation, since prices will rise in Spain by 4.3% this year, half a point more than I had anticipated. Despite the fact that the average CPI was 8.3% last year and will be reduced by almost half this year and to 3.2% for the next, the IMF calculates that the increase in prices will not drop below 2% per at least until 2028 (1.7%), and believes that the measures implemented to combat the rise in prices have not had the expected effect, especially with subjacent inflation -which does not take into account food or energy-, located at 7.5%, almost double the general rate.
The international organization also gives a wake-up call to the Government due to the unemployment figures, as Spain has the highest rate in all of Europe -only behind Ukraine-, a situation that the IMF extends for at least this year and next, with a forecast of 12.6% in 2023 and 12.4% in 2024, and all despite the record number of affiliates added to Social Security this year.
Compared to the rest of the European economy. The IMF attributes the low growth of regions such as Europe in the euro zone to the entrenchment of the conflict between Russia and Ukraine and to the danger that may arise with the outbreak of new variants of the covid. Also due to the tightening of financial conditions, after the European Central Bank has raised rates six times since July 2022, reaching 3.5%, the highest rate since the great financial crisis of 2008. The agency advises that this policy will continue in the coming months and will cause the eurozone to record “very poor growth figures” over the next five years, and He quotes verbatim that it will have a “special impact” on the Spanish economy. For this reason, he predicts that Germany will decrease by 0.1% in 2023, although in 2024 it will grow by 1.1%, three tenths less than what was calculated in January; France will do so by 0.7% -it will drop three tenths from 2024, to 1.3%; Italy rises one tenth this year to 0.7% and will drop next year to 0.8%. For the United Kingdom, it forecasts a fall of 0.3% this year, and for next year it expects growth of 1%.
With this context, Gourinchas has warned that growth during this year will be the result of “a significant remnant of activity in 2022”, a year in which “very strong fiscal measures” have been taken and to export revenues that, he pointed out, “will slow down” this year. Thus, the evolution of the war will be vital for European growth. Although last winter “a gas crisis” was avoided thanks to the precautionary measures taken by the governments and the lower demand due to the effect of an “atypically mild” winter, an escalation of the war “could trigger a new crisis energy in Europe and exacerbate food insecurity in low-income countries. In this scenario, the institution contemplates a “moderate additional tightening of credit conditions” due to greater stress on banks, concerned about their bank solvency and new crises in the financial system, as well as stricter control of their financial and credit activity. . In this situation, the IMF predicts that this tightening of financial conditions would cause a decrease in the level of world activity of three additional tenths in 2023, which implies a real growth of global GDP of around 2.5% instead of 2.8 % of baseline forecast, which would be the lowest growth since the global slowdown of 2001, excluding the impact of the pandemic and the great recession.