The IMF forecasts “weak” growth for Spain in the coming quarters


The technicians of the International Monetary Fund (IMF) have finished this Wednesday their annual review of the spanish economy, known as ‘Article IV’, and have concluded that the growth of the country’s gross domestic product (GDP) will be “relatively weak” in the coming quarters. “Growth is expected to be relatively weak in the coming quarters due to weak external demand and deteriorating consumer confidence,” the IMF stressed in its conclusions from the country’s economic review.

The organism multilateral considers that economic activity “should pick up in the course of 2023” thanks to the dissipation of supply problems, the recovery of contact-intensive services and the acceleration of Recovery Plan investments. In this sense, although the Fund has determined that the use of European funds “is accelerating” and that is something positive for Spain, it has criticized that there is a “lack of systematic and comprehensive information on implementationincluding that in national accounting terms”. This makes it difficult to assess whether public resources are reaching the real economy.

In terms of GDP, the IMF has revised expected growth to 4.6% for 2022, three tenths more than expected and two tenths above the forecast made by the Spanish Government (4.4%). This revision is due to the fact that its latest forecast, published in October, did not take into account the latest growth data available for the second quarter, which is why they were already pessimistic at the time of its publication. For 2023 forecast has remained unchanged at 1.2%. In this way, Spain will not recover its economic level prior to the pandemic until the beginning of 2024.

The agency has warned that the outlook “is subject to great uncertainty and the risks are mostly downward.” The main risks are energy prices by electricity or gas prices natural, but the IMF has also pointed to a sharper-than-expected slowdown in the economy worldwide or to a more pronounced tightening of financial conditions as a result of the rise in interest rates by the ECB.

Insist on the high level of debt

At the fiscal level, the IMF technicians consider that the public debt continues to be high and needs a “sustained” consolidation effort. Thus, although the government’s response was “very effective” in containing the effects of the pandemic, it was also costly by raising the debt/GDP ratio to 118%. In this sense, the consolidation of the primary deficit of 0.3 percentage points planned in the provisional budget plan for 2023 It is “appropriate” for the IMF, although it has warned that its execution is subject to solid income and less spending on energy measures.

The IMF considers that an adjustment of 0.6 percentage points per year is necessary from 2024 for Spain to achieve an almost balanced fiscal position by 2030. Regarding pensions, the IMF considers that they are necessary “additional measures” to counteract the increase in future spending derived from its indexation to inflation. By 2050, the consequence of this measure is to increase pension spending by 3.25% of GDP.

The agency has warned that “only a part” of this increase would be offset by other measures adopted in the first stage of the reform. Furthermore, the measures adopted in 2022 as the reform of the system freelancers “could have a positive financial effect”, but this depends on their design.

Employment and productivity

Among the conclusions of the IMF also includes a notice that levels and labor productivity growth rates in Spain have been lower in recent years than in similar economies. The IMF believes that this is due to cross-cutting factors such as the prevalence of SMEs, the high incidence of temporary employment and skill mismatches in the labor market.

In this sense, the IMF has positively assessed the reform of the vocational training system, as well as such as the ‘Startup Law’ and the ‘Create and Grow Law’. In addition, it has indicated that “greater efforts” are needed to address the “high number” of associated regulatory thresholds to the size of the companies and the differences in regulation between regions. Regarding employment, the IMF has assessed the labor reforms approved in December 2021 and has indicated that they are “providing positive results in terms of permanent job growthHowever, they have also indicated that it is “too early” to assess its final impact.


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