In its latest projection exercise, the International Monetary Fund (IMF) has only improved the growth forecasts for 2024 for Spain and the US among advanced economies. The organization has raised the projection of our country’s GDP growth by 4 tenths, from 1.5% in January to the current 1.9%, while seeing a slowdown in the rest of the European Union (EU).

In the report of the IMF’s evaluation mission in Spain, published last Friday, it already recognized that activity “has shown great resistance in a context of lower growth in the eurozone and more restrictive financial conditions.” [por las subidas de los tipos de interés del BCE]”.

The international organization has improved the growth forecast for our country in 2024 to 1.9%, from 2.5% in 2023, and has left that for 2025 at 2.1%. In this way, Spain will once again lead the advance of GDP (Gross Domestic Product) in the EU in the coming years.

The meager projections for Germany and France have suffered cuts of 3 tenths for both 2024 and 2025 in both cases, “due to the persistent weakness of consumer confidence.”

According to the IMF, Spain’s leadership will be sustained by boosting domestic demand. First, thanks to “an increase in real income [de las familias, por la creación de puestos de trabajo, la moderación de la inflación y las subidas de los salarios] and a gradual normalization of the household savings rate, which should support consumption.” And, second, thanks to the continued disbursements of the Recovery Plan and more favorable financial conditions [por el inicio de las bajadas de los tipos de interés del BCE]which “will lead to a certain rebound in private investment.”

The IMF expects a process of global disinflation, which will be especially intense in advanced economies. The estimate is that, in Spain, price increases will moderate to 2.7% on average in 2024, from 3.4% in 2023, and to 2.4% in 2025. For the eurozone as a whole, forecasts 2.4% and 2%, respectively.

Consequences of monetary austerity

In its exercise of global projections, the organization points out two relevant things regarding the monetary austerity of the central banks. One, that with their aggressiveness “they have safeguarded the credibility of their inflation objectives.” [el 2%]”. But secondly, he recognizes that “price-wage spirals, in which prices and wages accelerate together over a sustained period, have not generally taken hold.” This “second round” inflation has been the main justification for interest rate increases since 2022.

“To counter rising inflation, the main central banks have raised official interest rates to levels considered restrictive. As a result, mortgage costs have increased and credit availability is generally scarce, resulting in difficulties for companies in refinancing their debt, an increase in corporate bankruptcies and a moderation in business investment. and residential in several economies,” explains the IMF.

“However, despite concerns, a global economic recession has not materialized,” it continues. Mainly, because “households in major advanced economies were able to draw on the substantial savings accumulated during the pandemic to limit the impact of rising borrowing costs on their spending.”

On the other hand, because “changes in the mortgage and housing markets during the decade of low interest rates prior to the pandemic have limited the effect of the recent rise in official interest rates on household consumption in several economies.” In short, “the average maturity and the proportion of mortgages subject to fixed rates increased, moderating the short-term impact of rate increases.”

However, “the cooling effects of high official interest rates are intensifying in several economies,” warns the IMF.

“Job growth in Spain will moderate”

Specifically regarding Spain, the IMF report points out that “the withdrawal of support measures for energy and food inflation will generate specific price increases, but inflation should resume its downward trend from then on, approaching the ECB objective [el 2%] in mid-2025.”

And it considers “that employment growth will moderate as migratory flows normalize and the unemployment rate will slowly decline towards its structural level in the medium term, around 11%.”

The main weaknesses it detects are that “private investment remains weak, and consumption has only recently recovered to late 2019 levels, indicating overall moderate domestic demand since the pandemic.”

Among the main risks, the organization also highlights that “parliamentary fragmentation could hinder the application of structural reforms and fiscal consolidation, which in the long run could worsen business confidence, investment and growth.” And he adds the threat of “a less effective use of European funds from the Recovery Plan.”


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