The Diplomat
The International Monetary Fund (IMF) has revised its growth forecast for the Spanish economy in 2024 five tenths upwards, which it now estimates at 2.4%, while maintaining the forecast for 2025 at 2.1%, the same as by 2026, as reported by the multilateral institution at the end of its visit to the country within the framework of ‘Article IV’.
The IMF highlights the “solid and continued” performance of Spain in 2023, which grew by 2.5%, and which has now demonstrated “remarkable resistance” in the face of global uncertainty and the tightening of financial conditions, Europa Press reports.
The organization led by Kristalina Georgieva explained that the behavior of service exports has been “solid” and that, together with public consumption, they have been the main drivers of recent growth. For its part, the labor market maintained its “good results”, particularly thanks to the influx of immigrants and the increase in the activity rate.
However, despite its most recent rebound, investment remains below late-2019 levels, and this weakness has contributed to low productivity growth, according to the IMF. Furthermore, despite the “significant” decrease in the unemployment rate, it remains the highest in the eurozone.
Regarding prices, the IMF stated that general inflation has fallen “considerably” from its maximum in 2022 and the underlying variable has also followed a downward trend supported by the continued transmission of energy disinflation to food prices. processed goods and non-energy industrial goods.
Despite the “rigidity” of the labor market, the IMF points out, wage pressures have remained “contained”, in part, due to the low prevalence of formal indexation clauses and the guidance provided by the wage agreement reached in May 2023. at the national level.
For all these reasons, the IMF predicts that Spanish growth will reach 2.4% in 2024, four tenths more than the Government’s estimate, and 2.1% in 2025 (two tenths more than Spain’s forecast), supported, mainly, due to the greater growth of domestic demand.
“Private consumption is expected to strengthen as the household savings rate gradually normalizes and real wage incomes continue to rise steadily,” the report said.
Likewise, private investment will benefit from the relaxation of financial conditions and the disbursement of ‘Next Generation’ (NGEU) funds. The IMF anticipates that both headline and core inflation will continue to decline throughout 2024-25 and will approach the 2% target set by the ECB before mid-2025.
