The IMF improves its growth forecast for Spain in 2024 to 1.9% and maintains that of 2025 at 2.1%

Warns that internal political fragmentation could hinder structural reforms and fiscal consolidation.

The IMF improves its growth forecast for Spain in 2024 to 1.9% and maintains that of 2025 at 2.1%

Warns that internal political fragmentation could hinder structural reforms and fiscal consolidation


The International Monetary Fund (IMF) has revised four tenths upwards its growth forecast for the Spanish economy in 2024, which it now estimates at 1.9%, while maintaining the forecast for 2025, when it predicts an expansion of 2.1 %, as reflected in its final declaration of the mission of the international institution at the end of its visit to the country within the framework of Article IV.

In this way, the IMF's new projections are close to those of the Spanish Government, which anticipates a GDP expansion of 2% this year, while the Bank of Spain foresees a growth of 1.9% this year and the next. In the case of the European Commission, the most recent forecasts point to an expansion of 1.7% in 2024 and 2% in 2025.

In their statement, IMF technicians highlight the "great resilience" shown by the Spanish economy in a context of weakening growth in the euro zone and tightening financial conditions, which allowed the country to grow by 2.5% in 2023, surpassing the average of its European partners and standing out among advanced economies, thanks to the strengthening of household purchasing power, the increase in public consumption and the solid performance of service exports.

"Robust growth of 1.9% is projected in 2024 and 2.1% in 2025," they point out in the document, where they anticipate that, thanks to domestic demand, the average quarterly growth rate observed in 2023, of around 0.5%, "will continue in the coming quarters."

In this sense, they consider that a moderate increase in real income and a gradual normalization of the household savings rate should support consumption growth, while the disbursements of non-refundable transfers from the 'Next Generation EU' funds ( NGEU) and easing financial conditions should lead to some rebound in private investment.

Likewise, according to projections, inflation will continue to fall throughout 2024-25 in a context of reduction in international energy prices and containment of wage pressures, despite the withdrawal of support measures for Alleviating the effects of the energy and food crisis will produce occasional price increases, although inflation should subsequently resume its downward trend, approaching the ECB's goal (2%) by mid-2025.

On the other hand, the IMF mission predicts that employment growth will moderate as migratory inflows normalize and the unemployment rate will slowly decline towards the medium-term structural level of approximately 11%.

"Risks to the outlook are now more balanced, but remain tilted downwards on the growth side and upwards on the inflation side," summarizes the Fund.

In this regard, it warns that the prolongation of internal political fragmentation could hinder the implementation of structural reforms and the consolidation of fiscal accounts, which could eventually end up worsening business confidence, investment and growth, especially if conditions financial conditions tightened.

Among other risks mentioned in the statement, the IMF mission warns of a more limited or less effective use of NGEU funds than expected, a worsening of geoeconomic fragmentation and an abrupt slowdown in global or eurozone growth.

Regarding inflation, the main upside risks it warns of would be a potential rebound in international energy prices and a more persistent increase in unit labor costs associated with sustained wage pressures or weaker productivity growth. .