Spain faces economic headwinds as Europe braces for slower growth amid war costs and ongoing sanctions on Russia. The OECD reports a slower trajectory for 2023, with Spain’s GDP growth easing to 1.5% and the wider EU economy edging up only modestly. This marks a notable downgrade from earlier projections, reflecting deeper price pressures and energy concerns that have reverberated across the continent.
In contrast, the OECD remains relatively more optimistic about 2022, with Spain expected to post a 4.3% expansion this year. The organization nudges this forecast to 4.4%, signaling a stronger near-term performance despite a clear slowdown. Yet the outlook for 2023 shows the euro area expanding by just 0.3%, while the broader European region records slower momentum as the war in Ukraine and sanctions on Russia weigh on activity.
From the government’s perspective, the OECD’s latest outlook confirms a robust expansion for Spain, lifting its 2022 estimate and suggesting the country will outperform global, G20, and euro-area averages. The Ministry of Economy notes that in 2023 Spain’s growth rate could outpace the euro area average by a significant margin. Inflation, however, remains a key challenge. The OECD projects a 9.1% inflation rate for Spain this year, marking the second-highest level among OECD and G20 economies, surpassed only by Turkey. Spain’s administration highlights that the OECD’s 2023 inflation projection of 5% would sit about 1.2 percentage points below the euro-area average.
Economy slowing ‘especially in Europe’
The OECD emphasizes a broad loss of momentum, with Europe bearing the brunt. Germany, traditionally the continent’s engine, is forecast to slip into recession next year at -0.7%, while this year’s growth sits at 1.7%. Other neighboring economies, including France at 0.6% and Italy at 0.4%, are also expected to decelerate in 2023. While the war’s toll is significant, the slowdown is broader, affecting markets worldwide. Interest-rate policy tightening by the US Federal Reserve leads the way, followed by the European Central Bank. The OECD’s projections place the 2023 US growth at 0.5%, down seven-tenths from prior estimates, with China at 4.7% (-0.2).
Russia’s economy remains under pressure, with a projected 4.5% contraction in 2023. Inflationary pressures persist as energy, transport, and other costs push prices higher. The OECD notes that energy prices are a dominant driver of inflation, and Spain, with its higher energy exposure, faces a sharper rise than many peers. Between 2019 and 2021 energy costs represented about 5% of GDP for Spain. By 2022 they surged and are expected to stay elevated, accounting for approximately 11% of GDP. This heightened energy dependency underpins the inflation gap relative to neighboring economies.
Spain’s inflation dynamics and energy sensitivity set the tone for the coming year. The OECD’s forecast for 2023 places inflation around 5% in Spain, still above the euro-area average but lower than several peers. The energy supply challenge continues to complicate the eurozone’s outlook, and Spain remains highly energy-dependent compared with most partner economies. Outside the Continent, Turkey shows much higher inflation at roughly 71%, while Spain’s inflation remains the highest among OECD and G20 members outside Turkey, with the United States, France, and Germany in the 5–9% range.
Looking ahead, inflation is expected to ease gradually in 2024, though not to pre-crisis levels. Spain’s inflation projection for next year sits around the mid-5% range, with divergences across the euro area persisting. The euro area’s energy concerns continue to complicate the region’s recovery path, keeping price pressures elevated and the pace of growth inconsistent across member states.
Economy resilience and policy responses
Despite a slower path, Spain’s economy demonstrates resilience through a mix of domestic demand, services strength, and export performance. The OECD highlights that signs of recovery remain visible, supported by a favorable external environment and ongoing structural reforms. Policymakers are urged to balance inflation containment with growth-supporting measures, ensuring energy security and competitive pricing for consumers and businesses alike. The central challenge remains keeping energy costs in check while fostering investment that underpins productivity and long-term growth across sectors. The OECD’s analysis reinforces that Spain can maintain momentum relative to its European peers if policy levers align with energy stabilization, price discipline, and investment in innovation and workforce skills.
Overall, the OECD’s latest outlook underscores that the war in Ukraine and related sanctions impose a price tag on European economies, with Spain positioned to outperform several rivals in the near term but facing persistent inflation and energy risks. The coming year will require careful policy calibration to sustain growth and shield households from continued price shocks. The broader EU context signals a cautious but continuing recovery, anchored by gradual improvements in energy supply, trade, and domestic demand. [OECD outlook report, 2023]
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