The OECD has raised its growth forecast for Spain to 1.7 percent this year, a noticeable upgrade from earlier projections and well above the euro area average. The revision reflects signs that inflation is moderating and that consumer and business confidence are stabilizing after recent volatility.
The Organization for Economic Co-operation and Development released its interim Outlook report on Friday, adopting a cautiously optimistic stance about Spain compared with earlier expectations from the European Commission. The update shows an uptick in projected GDP growth versus the previous month, signaling a stronger near term outlook for the Spanish economy.
This 1.7 percent pace stands out as the strongest among the major euro area economies. France and Italy are anticipated to grow at more modest rates in the same period, while Germany is expected to see the smallest expansion among these large economies, reflecting ongoing structural and geopolitical headwinds.
The OECD notes that growth in Spain could hold steady at this 1.7 percent level through the current year. This mirrors what the organization projected in its previous assessment, though it remains slightly below the European Commission’s February outlook.
Other large euro area nations are anticipated to approach similar growth trajectories in the following year, with occasional variances: Italy near 1 percent, France around 1.3 percent, and Germany near 1.7 percent.
The OECD projections show Spain’s average inflation this year at about 4.2 percent, a downgrade from earlier estimates by roughly six tenths of a percentage point. This figure is a significant decrease from the inflation rate recorded in the previous year and aligns with a broader deceleration across the euro area.
For 2023, inflation in Spain is expected to stay notably lower than the euro area average, which remains elevated compared with other major European partners. France, Italy, and Germany are foreseen to experience higher inflation rates, underscoring differing price dynamics within the single currency area.
The challenge for Spain is that inflation is not projected to fall as quickly as in other countries, with a slower decline anticipated into 2024. This contrasts with the more pronounced easing expected in nations like Italy and France, where inflation trends are projected to soften more noticeably.
One factor contributing to the slower inflation decline is the persistent strength in core prices in Spain. When energy and fresh food are excluded, core inflation shows a resilient uptrend, a key area of concern for policy makers as it reflects underlying price pressures rather than volatile energy components.
The OECD data indicate that core inflation in Spain could hover around a higher level through the coming year, signaling that price pressures inside the economy remain firmer than in some peers. This contrast with the euro area average highlights the importance of continued vigilance by monetary authorities and the need for policy measures that address underlying inflation dynamics without choking growth.