After recently concluding the Article IV consultation with Spain for 2022, the executive board of the International Monetary Fund (IMF) announced that economic growth in Spain is expected to moderate from 5.2% last year to 1.1% this year, reflecting the effects of high energy and food prices, tighter financial conditions, and weaker external demand.
By early 2024, the output is anticipated to return to its pre-pandemic level. The IMF said that because of a high base in 2022, the removal of supply constraints, and some normalization of global fossil fuel prices, headline inflation is anticipated to decline gradually in 2023.
Nevertheless, it stated that the headline and core inflation rates are anticipated to stay over the 2% objective in the foreseeable future.
Although the nation’s economy remained resilient in 2022 despite fresh challenges brought on by the aftermath of the Russia-Ukraine conflict and higher global food and energy prices, the IMF reports that the slowing of trading partners’ growth, deteriorating consumer and business confidence, and rising interest rates have slowed the recovery of output.
Employment topped its pre-pandemic level last year, and a robust recovery in tourism and other services backed growth.
Rising energy prices and ongoing supply issues contributed significantly to 2022’s high inflation rate. Headline inflation dropped from double-digit levels in the summer to 5.8% in December due to falling European gas prices and the effects of energy assistance policies.
Due to the slow transfer of increasing energy costs to other prices and maybe dwindling economic spare capacity, core inflation is still over 6%. So far, wage pressures have been kept in check.
