New momentum is visible in the Spanish economy. The International Monetary Fund (IMF) released its latest world economic outlook on Tuesday, projecting GDP growth of up to 2.5 percent under current practices. The forecast keeps a 2 percent growth estimate for the next fiscal year, consistent with the calculation published in April.
Compared with April, this expansion exceeds that of other major economies, placing this year’s GDP growth at 2.3 percent, up from 1.6 percent forecast in March. The upgrade surpasses Spain’s own government projections in the stabilization program updated for Brussels in May, which put growth at 2.1 percent. The European Commission has forecast 1.9 percent growth for this year and 2 percent for 2024, marking an improvement over earlier estimates.
According to the IMF, revisions upward reflect stronger currencies, services, and tourism, which also help Italy by about four tenths of a percentage point. This positive trend has been reinforced in recent months by upward revisions from several organizations and sectors, including education services. A key feature is the evolution of employment; GDP rose 0.6 percent in the first quarter from late 2022, slightly higher than the 0.5 percent previously estimated by the National Institute of Statistics (INE).
Fall in Germany
In contrast, Germany, the euro area’s largest economy, is forecast to decline by 0.3 percent in GDP, due to weak manufacturing output and contraction in the first quarter of 2023. This led to a two-tenths downward adjustment from prior estimates. Germany is the only major euro-area economy expected to shrink, with a projected 1.3 percent recovery next year. Overall, the eurozone’s GDP is expected to rise by 0.9 percent this year, and 1.5 percent in 2024, each up slightly from the April projections.
The IMF also forecasts a slowdown in global growth, easing from 3.5 percent in 2022 to 3.0 percent in 2023 and 2024, an uptick from April’s numbers. While 2023 looks better than earlier in the year, it remains historically weak, well below the 2000–2019 average of 3.8 percent for 2023–2024. Advanced economies are expected to decelerate, with a forecast of about 1.5 percent growth for this year, a touch higher than April in the United States, which is projected to expand by 1.8 percent in 2023 but slow to about 1 percent in 2024.
The IMF notes a cycle of rising interest rates, with the United States’ Federal Reserve holding rates in the 5.0 to 5.25 percent range and the European Central Bank moving from 0 to 4 percent over the past year. The policy stance could tighten further this week, continuing to suppress economic activity. Yet the report stresses that financial systems have shown resilience, and banks in developed economies have tightened lending rules in response to higher rates.
Despite these adjustments, world economic activity has shown resilience, with the service sector contributing the most to that strength. The IMF projects a gradual decline in global inflation—from about 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024—with core inflation expected to ease gradually, though 2024 forecasts have been revised upward in some cases.
IMF analysts warn that the combination of debt-limit negotiations in the United States and earlier tightening measures may reduce upside risks to the financial sector. They also note a risk of renewed turbulence if further shocks occur, such as intensified conflicts, climate-related events, or new stages of monetary tightening. Still, the overall outlook for global growth remains tepid and subject to shocks, with inflation possibly staying elevated if risks materialize.
In the IMF’s view, recent debt-limit agreements and the containment of banking stress in the United States and Switzerland have tempered near-term financial risks. The outlook for global trade also implies a slower recovery, with trade growth pegged at about 3.7 percent in 2024, down from 5.2 percent in the previous year and well below the long-term average of 4.9 percent seen from 2000 to 2019.