The IMF lowers Spain’s long-term growth forecasts | Economy

The future looks less promising than expected. The International Monetary Fund has maintained Spain’s growth forecast for this year to 1.5%, but has lowered not only that of 2024, but also that of all subsequent years until 2028. The new trajectory of the Spanish economy that draw their forecasts is more rampant, with 2% growth in 2024 and 2025 and a slowdown in the following years, to slightly less than 1.6% in 2028. If the new forecasts are compared with the previous ones, along the way more than one point of growth remains in the coming years.

Economic forecasts must always be taken with caution, they are subject to constant revisions and the uncertainty about them is greater the longer the time horizon, so the future is not written. What these long-term forecasts indicate is a kind of trend or potential growth in economic activity. The agency has announced that the entire world is facing a long phase of low growth not seen in decades, around 3%.

According to the Fund’s forecasts, Spain is also facing a brilliance of economic growth well below the trend of recent decades, with an average of 1.7% in the next six years and a maximum of 2%. These are rates that, according to the forecasts contained in the agency’s updated database, will barely serve to lower unemployment, which would remain stagnant at just above 12% if those forecasts come true.

It is not a Spanish problem, but a general one. Of the large economies in the euro zone, the Spanish will be the ones that will grow the most this year and next, according to IMF forecasts, and will also stand out in most of the following years.

The First Vice President of the Government, Nadia Calviño, prefers to see the positive side. “What there has never been in our country are two years of growth above 5.5% and a growth perspective this year above that of the countries around us,” she pointed out this Tuesday at a press conference in Washington.

“What the Monetary Fund is signaling is a weak growth outlook globally. Within this international context marked by uncertainty and volatility, the Spanish economy is going to grow faster than the countries around us”, he added. And not only that, but the economic vice-president aspires to improve these forecasts: “Our forecast is that precisely the recovery plan, the reforms and investments that are underway, are going to increase the potential growth of the Spanish economy and, therefore, therefore, have more intense growth for a longer time and a perspective of greater prosperity and progress in the coming years”, he added.

Regarding unemployment, what Calviño highlights is that the creation of jobs has brought employment to historical figures. The fact that unemployment is falling more slowly is due, as he explains, to the increase in the active population, but this increases the potential for growth and is, in his opinion, good news.

“In such a complex international context, marked by uncertainty and volatility, the Spanish economy continues to show notable strength. We continue with very strong growth”, he concludes, noting that Spain is expected to be one of the main growth engines in Europe. The vice president highlights that the figures and indicators for the first quarter have been very good.

The long-term forecasts of the International Monetary Fund for Spain do improve in relation to public accounts. The public body forecasts a deficit of 4.5% of gross domestic product (GDP) this year, in line with what it calculated so far, but lowers the forecast for 2024 to 3.5%, from the 4.2% that predicted in October. The good progress of the collection, which receives a boost from inflation, is keeping Spain from keeping the budget gap at bay. In the long term, however, the Fund’s forecasts suggest that the public deficit will increase again, up to 3.8% of GDP in 2025 and 4% from that year on. It’s a slight improvement over forecasts six months ago.

The IMF has also improved public debt forecasts. In October, the forecast was 112.1% of GDP for 2023, 110.1% for 2024 and 109.0% for 2025. Now Wait and 110.5%, and 108.3% and 107.9% for those same years. Nominal GDP growth, that is, without discounting inflation, is allowing public debt to maintain a more pronounced downward path. So, now, the fund is wary of further progress after 2025 and places its debt forecast at 109.3% of GDP in 2028.

Follow all the information of Economy and Business in Facebook and Twitteror in our weekly newsletter