Recently, the International Monetary Fund adjusted its growth outlook, shaving 0.8 percentage points from its earlier 2023 projection and placing Spain on a path where 4% of the euro area’s overall expansion would come from its economy this year. The IMF sees Spain catching roughly 2% above the eurozone average in both 2023 and 2024, underscoring a pace that keeps the country near the forefront among the major euro economies.
Spain is expected to remain the fastest growing among the large euro-area economies, even though its latest revision shows a sharper downgrade than some peers, notably Germany. The IMF’s update positions Spain ahead of the broader euro area in terms of growth this year, with forecasts pointing to a 2.6% expansion in 2023 and about 1.2% in 2024.
In its Global Economic Perspectives update, the IMF notes a slower 2023 path for Spain. The 2% GDP increase for the year marks a 1.3 percentage point downward adjustment from prior estimates, reflecting shifts in energy costs and external demand that temper the rebound after the pandemic shock.
War in Ukraine Dampens Recovery
In April, the IMF released the first forecast after Russia’s invasion of Ukraine, revising Spain’s 2023 growth down by one percentage point to 4.8%, compared with the prior projection. After a strong rebound in 2021, when Spain grew 5.1% following a 10.8% drop in 2020, the economy faces a more challenging path as conflict persists and global conditions tighten.
The IMF highlights how elevated energy prices, weaker household spending, and slower industrial activity, all compounded by ongoing supply chain frictions and higher production costs, contribute to a less favorable outlook for European economies. Spain, like its neighbors, remains sensitive to the pace of its trading partners, many of which depend more heavily on imports of gas from Russia.
As a result, the IMF adjusted downside risks for Europe, noting that the two largest economies, Germany and France, are also central to Spain’s external demand. In 2021, these two economies together accounted for a sizable share of Spain’s exports and foreign trade, illustrating how regional dynamics influence Spain’s growth trajectory.
Germany is projected to experience a smaller rise in GDP than Spain, with 1.2% growth anticipated for 2022, marking a larger downward revision. France shows a more modest improvement, with a forecast of 2.3% growth, about six tenths lower than previously projected. Italy, the only major European peer still expanding more steadily, is expected to post around 3% growth, even amid political uncertainty following the resignation of a prime minister.
The IMF also warns about the broader risks to Europe if the energy shock persists or deepens. A complete disruption of Russia’s gas supplies could push inflation higher as energy costs stay elevated. Policymakers are urged to consider decisive steps to curb inflation, including tighter monetary policy, while acknowledging that such moves carry real economic costs and delaying action might worsen outcomes.
Overall, the IMF’s assessment points to a fragile recovery in Europe, with Spain positioned as a relative leader within the euro area but facing a still uncertain environment shaped by energy prices, geopolitical tensions, and the pace of global demand. The agency’s guidance emphasizes prudent policy action to reduce inflation pressures without stalling growth, a balancing act that matters not only for Spain but for broader North American and international markets that monitor the euro zone’s resilience and export dynamics.