Spain will grow by 1.1% in 2023 and by 2.4% in 2024, according to the IMF

The International Monetary Fund (IMF) anticipates a sharp slowdown in the Spanish economy this year, when it will grow by 1.1%, compared with 5.2% last year, while for next year it anticipates an expansion of 2.4%, according to the update of the world economic outlook published at the end of January 2023 by the institution.

Therefore, although the IMF maintains its forecasts for Spain, which it released in mid-January, compared with last October's forecasts, Spain is the only major economy whose growth expectations for both 2023 and 2024 have been lowered. Nevertheless, the Spanish economy continues to have the most optimistic forecasts for expansion by the IMF for this year and the next among the large eurozone economies.

In the conclusions of the IMF's board of directors on the Spanish economy, published on 19th January, the institution anticipated that Spain would reach the level of activity prior to the pandemic at the beginning of 2024.

When it comes to global figures, the agency has revised up its growth forecast for 2023 by two tenths of a percentage point, when the global economy will slow its expansion to 2.9% from 3.4% in 2022, while a year later it anticipates a rebound to 3.1%, a tenth of a percentage point lower than its projections last autumn.

"The rise in central bank interest rates to combat inflation and Russia's war in Ukraine continue to weigh on economic activity," explains the entity, for which the recent reopening of China "has cleared the way for a faster recovery than anticipated".

Despite this slight improvement in the growth forecast for 2023, the international institution has warned that the expected expansion is below the historical average between 2000 and 2019 of 3.8%. Moreover, it foresees a worse performance in advanced economies, while in emerging market and developing economies, growth is estimated to bottom out in 2022 and growth will gain momentum in 2023 thanks to China's reopening.

"Neither global GDP nor global GDP per capita is projected to register negative growth, which is typically the case when a global recession occurs," the institution stresses in its update of its global economic outlook.

As for price developments, the IMF expects global inflation to decline from 8.8 per cent in 2022 to 6.6 per cent in 2023 and 4.3 per cent in 2024, still higher than before the pandemic, when inflation hovered around 3.5 per cent.

The IMF also anticipates that the tightening of monetary policy will have a cooling effect on inflation, which will fall globally from 6.9 per cent in the fourth quarter of 2022 to 4.5 per cent in the fourth quarter of 2023.

"Even so, the disinflation process will take time," warns the IMF, which warns that by 2024 average annual headline and core inflation levels will still be above pre-pandemic levels in 82% and 86% of economies, respectively.

Thus, although the balance of risks remains tilted to the downside, the IMF considers that adverse risks "have moderated", noting that factors that may push upwards would be a larger contribution from pent-up demand in many economies or a faster fall in inflation.

Among the downside risks to growth, the Fund warns of worsening health developments in China slowing the recovery, an intensification of the war in Ukraine and a tightening of global financing conditions exacerbating debt overhang tensions.

It also warns of the risk that financial markets could suddenly reprice in response to adverse inflation developments, while geopolitical fragmentation could slow economic progress.

"In most economies, in the face of the cost-of-living crisis, the priority remains to achieve sustained disinflation," recommends the IMF, which recalls that fiscal support should be better targeted to the groups most affected by the food and energy crisis, with the withdrawal of across-the-board fiscal easing.