Another batch of positive news for Spain’s governing coalition. The Organization for Economic Co-operation and Development (OECD) has upgraded its forecasts, projecting a 2.1% GDP growth for Spain in 2023. The Paris-based body expects growth to exceed the Eurozone average of 0.9% and the 38-country OECD average of 1.4%, with Spain standing out among Western economies.
The OECD’s latest projections mark a notable upgrade from its March outlook, aligning with the Bank of Spain’s more optimistic view of a little over 2% growth for 2023. The forecast also sits above the European Commission’s latest estimate, which projects a 1.9% rise in Spanish GDP for 2023. The OECD’s 2.1% figure corresponds with the government’s own target for the year.
Spain posts the highest growth among major EU economies at 2.1%, a pace well ahead of Italy at 1.2%, France at 0.8%, and Germany at or near zero. The overarching narrative remains that the European powerhouse has been hardest hit by inflation and the war in Ukraine, and yet its growth prospects still lag slightly behind the policy environment the OECD envisions for the continent.
1.9% growth in 2024
“In the face of Russia’s aggression, the Spanish economy has shown remarkable resilience. Consumer sentiment may be subdued, but confidence among businesses and households has improved since last autumn,” the OECD notes in its assessment of Spain. The report highlights dynamic labor markets and records a 1.3% growth in the first quarter of 2023 as a sign of ongoing momentum.
The OECD also lifts its 2024 growth forecast for Spain to 1.9%, signaling a continued cooling trend but still higher than some earlier estimates. While this 2024 projection trails the European Commission’s 2% forecast, it still marks a two-tenths upgrade from prior predictions. Inflation in Spain is projected at 3.9% for the coming year, a rate that remains below the 8.3% spike seen in 2022 and only modestly above the current level, suggesting inflation may ease further as the year’s progress unfolds.
Slowdown in the euro area
The OECD attributes a mix of factors that are gradually easing downward pressure on the world economy, including cooling inflation, an easing energy crisis, and China’s re-opening after periods of restrictive measures. Collectively, these trends support a modest improvement in global growth, with world GDP projected to rise around 2.7% this year, just above the OECD’s earlier estimate and still shy of the 3.3% growth seen in the previous year.
China leads the revival, expected to grow about 5.4% after posting a rough year in 2023 marked by strict policy controls under Zero Covid. The United States is forecast to decelerate, with GDP nudging only 1.6% this year and about 1% in 2024. The euro area is also expected to slow, with a 0.9% expansion in 2024 rising to roughly 1.5% the following year.
The OECD cautions that inflation will persist, even as energy and food prices retreat. Services inflation remains resilient, driven by labor costs and domestic demand. Policymakers across OECD economies must balance growth with inflation control, a difficult but essential task for sustaining longer-term prosperity. The report emphasizes that governments should pursue growth-enhancing, sustainable policies that support productivity without sacrificing price stability. The message is clear: careful policy design will be needed to safeguard both growth and living standards in the coming years. [Citation: OECD, 2024]”
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