Spain’s economy is on a clear upward trajectory, emerging as the main driver of growth in Europe this year. The International Monetary Fund (IMF) has raised its forecast for gross domestic product (GDP) growth by five-tenths of a percentage point from the April estimate, bringing it to 2.4%. It also holds the 2025 projection at 2.1%. This improvement far outpaces the euro area, where growth is forecast at 0.9% for 2024 and 1.5% for 2025, revised up from prior expectations. The outlook for this year aligns with the government’s own upward revision to its macroeconomic framework, including deficit and debt targets and the spending ceiling for the 2025 State Budget.
In Europe more broadly, momentum is constrained by Germany’s near-stagnant performance, despite its role as the continent’s engine, with growth seen at only 0.2% in 2024 and 1.3% in 2025. For France, the IMF projects a modest uptick of two-tenths of a percentage point from four months ago, with 0.9% growth in 2024 and 1.3% in 2025, slightly lower than earlier estimates. Italy is expected to rise by 0.7% this year, two tenths lower than April’s forecast, and to grow by 0.9% in 2025, as previously anticipated in spring forecasts.
The IMF’s latest update also frames global growth as aligned with its spring World Economic Outlook (WEO), projecting 3.2% expansion in 2024 and 3.3% in 2025. In the United States, growth is forecast at 2.6% for this year, marginally below the spring projection, and 1.9% for 2025.
Inflation in the services sector continues to hinder progress toward disinflation, complicating monetary policy. As a consequence, the European Central Bank (ECB) is expected to keep policy rates steady in its upcoming meeting after delivering the first rate cut in eight years in June.
The IMF notes that upside risks to inflation have risen, implying a longer period of potentially higher interest rates amid ongoing trade tensions and growing political uncertainty.
Activity and Trade
The IMF’s update highlights that global activity and trade strengthened toward the end of the previous period, led by robust exports from Asia, particularly in the technology sector. Relative to the April 2024 WEO, first-quarter growth surprised on the upside in many economies, though Japan and the United States showed notable downward surprises. In Europe, service-sector recovery is evident, and there are signs of broader improvement. The euro area is seen as having likely bottomed out, supported by stronger services and net exports. Looking ahead, consumption is expected to be a main driver next year, aided by rising real wages and greater investment as financing conditions loosen and monetary policy gradually eases. The manufacturing sector hints at a slower rebound in Germany.
The report stresses that China, forecast to grow 5% this year — four-tenths higher than the April estimate — and 4.5% in 2025, four-tenths higher as well, benefited from renewed domestic demand. This helped a positive first-quarter outturn and reduced some of the production gaps among major economies.