MADRID, 19 (SERVIMEDIA)
The International Monetary Fund (IMF) improved this Thursday its estimate of Spanish GDP growth in 2022 by six tenths, to 5.2%, but reduced its forecast for 2023 by one, when it expects the domestic economy to grow by 1.1 %.
In updating its forecasts within the framework of Article IV, the agency highlights that economic activity in Spain “has remained resilient despite the headwind” caused by the Russian invasion of Ukraine. It values ”the strong rebound in tourism and other services”, which have “supported” growth in 2022, and employment levels, which “have exceeded their pre-pandemic level”.
“However,” the report indicates that high global energy and food prices, weakening growth in trading partners, deteriorating consumer and business confidence, and rising interest rates “ they have slowed down the recovery of production”, which is why it delays until the “beginnings” of 2024 – when the Spanish economy will grow by 2.4% – the return of economic activity to pre-pandemic levels.
The IMF praises in the document “the economic resilience” of Spain and “the solid performance” of the labor market in “the context of successive shocks”, but warns that the outlook for 2023 is subject to “great uncertainty given the vulnerability to the secondary effects” of the war in Ukraine, as well as the weakness of world demand, the tightening of financial conditions and the pressure of energy prices.
Given this situation, the agency predicts that Spanish GDP will grow by 1.1% in 2023, a figure that “reflects” the impact of the risks listed for this year. However, he points out that an “accelerated use” of European funds – whose progress he welcomes – and a “faster” liquidation of household savings could boost domestic demand.
In parallel, it stresses the importance of applying “flexible and carefully calibrated” macroeconomic policies, as well as a “strong implementation of the structural reform agenda” in order to support “sustainable and inclusive growth”.
INFLATION
Regarding inflation, the agency expects it to moderate from the 8.5% registered on average in 2022 to 3.7% this year, although the underlying would be around 4.6% on average. This estimate is the result of the “high” increase in prices registered during the past year, the reduction of “supply bottlenecks” and a “certain normalization” of world prices for fossil fuels.
The IMF underlines the effectiveness of the “timely support policy” for households and companies carried out by the Government, although it warns that it is “probable” that both headline and subjacent inflation will remain above the target of 2 % in the short term set by the European Central Bank (ECB), since it predicts that the annual average will be 2.7% in 2024 and 2.1% in 2025.
Regarding the latest anti-crisis decree, he welcomes the fact that the Executive has listened to its recommendations and has opted for “better targeting” of the measures, as well as “greater preservation of price signals”.
PUBLIC DEFICIT
Regarding the public deficit, the IMF estimates that it closed 2022 at 4.5% and improves the Government’s forecast by five tenths, which put it at 5%. Looking ahead to 2023, it is expected to increase by one tenth, to 4.6%, and from there it will drop to 3.5% in 2024 and 3.7% in 2025.
With these figures, the agency highlights the improvement in public finances since the pandemic and welcomes the “moderately contractive” fiscal stance provided for in the 2023 General State Budget (PGE).
In any case, he does not miss the opportunity to emphasize that in the coming years a “gradual and sustained fiscal consolidation, backed by a medium-term consolidation plan, will be “necessary” to create space to respond to future shocks.” It also calls for the adoption of additional measures “to preserve the sustainability of the pension system.”
JOB
On the other hand, the IMF affirms that wage pressures on inflation “have been contained until now” and recognizes the “positive” results of the labor reform.
Looking ahead to 2023, he calls for “continuous monitoring” of employment policies to assess “the effectiveness” of the labor reform, and warns that it will be a year in which the unemployment rate will remain intact at 12.8% and in which only 0.5% more jobs will be created. For 2024 and 2025, the IMF predicts more job creation, with growth of 0.8% and 0.6%, respectively, which would lower the unemployment rate to 12.5% and 12.3%.
BANKING
Lastly, the agency sends a message to Spanish banks, asking them to be “prospective” when evaluating the quality of their loans and to maintain “adequate levels of provisions.”
In addition, and in line with the previous update of Article IV, it insists on “closely monitoring” the impact of the new temporary tax on banks on the provision and cost of credit.
(SERVIMEDIA) JAN-19-2023 17:51 (GMT +1)PTR/clc
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