The Diplomat
The International Monetary Fund (IMF) has substantially cut its growth expectations for the Spanish economy in 2021 and 2022, reports Europa Press.
Specifically, the IMF reduces the expected expansion of GDP this year to 4.6% from the 5.7% anticipated last October, while for next year it expects the rebound in activity to be limited to 5.8%, six tenths of a percentage point lower than previously expected.
According to the preliminary conclusions of the IMF staff following their visit to Spain for the preparation of the ‘Article IV’, the Spanish economy continues to recover from the deep recession caused by the pandemic, with GDP contracting by 10.8% in 2020, although output still remains below the pre-pandemic level, in part due to the persistent impact of the pandemic on personal contact-intensive sectors and bottlenecks in global supply chains.
The forecasts of the IMF mission to Spain are thus close to those recently published by the Bank of Spain, which forecasts growth of 4.5% this year and 5.4% the following year, moving away from the government’s macro picture, which maintains the forecast of 6.5% growth in 2021 and 7% in 2022.
In their analysis, the IMF staff believe that private consumption will continue to be the main driver of short-term growth in Spain, underpinned by a solid recovery in the labour market and the normalisation of household savings.
Thus, they expect investment to take hold in 2022, thanks to robust demand, continued favourable financing conditions, a gradual disappearance of bottlenecks in global supply chains, and a faster deployment of Next Generation EU (NGEU) funds.
In this respect, the IMF mission estimates that the cumulative impact of the NGEU funds on Spanish GDP could be between 1.5% and 2% by the end of 2022.
Likewise, in their conclusions they also anticipate that external demand, particularly international tourism, will continue to recover next year as global vaccination rates rise.
Regarding price developments, the IMF mission considers that headline inflation is likely to remain elevated in early 2022 due to high energy prices and supply chain disruptions, but expects it to moderate in the second half of the year as these factors dissipate.
In this regard, he cautions that it is important that wage negotiations continue to internalise the transitory nature of the current drivers of inflation and avoid a vicious cycle of higher wages leading to higher inflation.
