High prices and slowing growth are occurring together. Economists talk about stagflation, a situation where growth stalls and GDP stops rising. While warnings from the International Monetary Fund suggest the economy might drift toward that scenario, the current picture is not there yet, even as global voices warn that the worst could still come.
Forecasts remain mixed but show resilience for this year in Spain, driven by momentum in the second and third quarters. Yet the outlook for the coming year is dimmer. Each new projection trims growth for 2023.
The government has had to revise its outlook four times since last year. It now places growth around 4.3% for 2022 and 2.1% for 2023, a half-point lower than the previous estimate. Even without stating the word recession outright, the figures imply a slower pace, as two consecutive months of weak expansion raise questions about the trajectory next year. Analyses from services that study the economy point toward a slowdown of roughly 1% for the following year, according to officials linked to the administration.
Without speculation about Italy or Europe leading the way, the broader euro zone appears to be diverging from Germany’s growth path. The General Council of Economists has even discussed the possibility of a summer downturn, signaling two consecutive quarters of GDP decline similar to the pattern seen in the United States.
Last year’s activity growth was projected to be about 3.5% for the coming year, but estimates have been pulled back, yet Spain is still expected to outpace the larger euro-area economies. The IMF’s latest report places growth for the euro area at about 1.2%, a drop of 2.1 percentage points from its April estimate, underscoring a softer global path.
Sources within the Department of Economy indicate that for 2023 Spain’s economy could double the euro-area average in some measures, while the euro remains stronger than many other major economies. Inflation was forecast to peak in 2022 for Spain and to remain below the euro-area average in 2023, though the path remains uncertain as price pressures persist.
Inflation estimates have deteriorated to a three-month horizon, with price gains still high despite a slowdown in September. The war in Ukraine has not shown a clear end, contributing to ongoing uncertainty. Germany reported price levels rising by around 10%, and in the United States, the consumer price index has stayed elevated, with rates above 8% overall and about 6.6% excluding energy and volatile components. When Germany experiences pressure, neighboring European economies feel the impact.
The challenge with current estimates is that government projections feed into the 2023 General Government Budget plan. The Bank of Spain, a day after the finance minister submitted the budget to Congress, released forecasts that echoed the executive’s but were somewhat more conservative, suggesting about 1.4% growth for the following year. BBVA Research is even more cautious, projecting roughly 1%, while inflation remains a central concern across Europe and beyond.
Amid these projections, the First Vice President and Minister of Economy, Nadia Calviño, has emphasized the Spanish economy’s strong resilience. Speaking from the United States at the IMF and World Bank autumn meetings, Calviño asserted that Spain continues to show solid growth and possesses a range of strengths, even as challenges lie ahead.
Before heading to Washington for IMF gatherings, Calviño noted at a press conference that despite a downward trend, the growth forecast for next year remains well above many neighboring economies. The message highlights Spain’s ability to maintain momentum while navigating a complicated global environment.