A solid 2022 for Spain helped by strong export demand and resilient domestic demand; a year later, growth cooled but remains higher than many euro area peers. These are the gist and nuance of Spain as seen through the IMF World Economic Outlook and the World Bank during the annual IMF-WB briefing in Washington this week.
The projection for Spain this year shows 4.3% growth, a touch higher than the July estimate and a bit lower than the upside forecast from last spring. For 2023, the outlook points to a sharper slowdown, with growth near 1.2%. That mark is more than eight tenths below July’s projection and about two percentage points lower than the April outlook. Even with the sizable revisions, Spain sits at the top of the euro area growth rankings, surpassing neighbors such as Germany and Italy, which are expected to record slower performance. The IMF’s base scenario for the euro area implies an average uptick of about 3.1% in 2023 and 0.5% in 2024, yet this hides wide variation among countries and mirrors the inflationary spillovers from the war in Ukraine.
Inflation is a central concern. The IMF notes that price pressures have remained persistent, driven in part by energy costs and broad price levels that affect households and businesses across member economies. The analysis highlights that even nations with high shares of renewables have not escaped price escalations, a point underscored by Spain, Denmark, Ireland, and Portugal in the recent readings.
Spain’s projections diverge from government forecasts. The state budget plan anticipates a softer path for next year and a slightly higher level for this year, with growth near 4.4% and an anticipated downward revision to 2.1 percentage points in 2023. The budget framing has prompted debate among economists about the pace of public spending and the resulting fiscal trajectory. Resource estimates peg growth around 7.7% for the year and reflect a mix of domestic demand, tourism, and services output.
The Bank of Spain adjusted its near-term outlook, showing a tighter fiscal stance for 2023 followed by a stronger expansion in 2024. Other observers, including BBVA Research, have trimmed their forecasts for the coming year to around 1% growth. Taken together, the consensus points to a marked slowdown in 2023 compared with 2022, with tourism and its spillovers to services and industry playing a pivotal role in the early months of the year.
In New York, the vice president and finance minister highlighted the resilience of the Spanish economy, emphasizing solid growth drivers and a capacity to meet challenges ahead. Officials noted that the IMF services team expects the country to maintain momentum into the next year, especially if European funds are effectively deployed and domestic reforms stay on track.
During the briefing, IMF researchers stressed that Spain performed well in 2022 and that the upcoming data will be crucial for confirming the trajectory. The dialogue also flagged potential upside if second-quarter indicators improve and if there is continued integration of EU funds into national investment, which could lift prospects beyond current baseline projections.
Inflation forecasts remain a key variable shaping the slowdown narrative. For 2022, the IMF projects inflation near 8.8%, with a path around 4.9% in 2023. Inflation trends lag behind the broader price level, expected to average about 7.1% in 2022 and 4.1% in 2023, underscoring the inflation challenge that touches households and firms alike.