The International Monetary Fund raises the prospects for the growth of the Spanish economy to 2.5%

The fight against inflation is beginning to bear fruit, but it has come at a cost. he International Monetary Fund (IMF) Confirm update World Economic Outlook (WEO) that large increases in interest rates have affected economic growth. Particularly, in the more advanced economies, which will make progress this year of just 1.5%, nearly half that in 2022. The body that guides Kristalina GeorgievaOn the other hand, it raised the forecast for Spain to 2.5% “given the greater strength of services and tourism” from the 1.5% expected in the document from last April. This improvement means that Spain will be the advanced economy that will grow the most in 2023, more than double (and even almost triple) the rate of the eurozone. But in addition to this, the IMF’s chief economist, Pierre-Olivier Gorinchas, emphasized that Spain also stands out for lowering inflation faster than the rest of the eurozone, so the price hike this year will stand at 3.2%.

The good performance of the Spanish economy during the first half of the year forced the International Monetary Fund to raise its economic forecasts by one percentage point in just three months. Washington-based organization In doing so, it joins the international consensus on the Spanish economy It far exceeds the forecast of the Pedro Sanchez government, which expects an economic expansion of 2.1% for this year. In fact, the National Institute of Statistics has already revised its GDP data for the first quarter and concluded that the increase was 0.6%, a tenth more than estimated, in the context of The eurozone was flirting with recession. Of course, the International Monetary Fund warns that this economic acceleration will lose steam as tourism reaches pre-pandemic levels.

The International Monetary Fund expects the single currency countries to advance only 0.9% in 2022 and 1.5% in 2023. Among the major economies of the eurozone, the organization expects a slight improvement for Italy (1.1% this year and 0.9% next) and practically reaffirms its forecasts for France (0.8% and 1.3%, respectively). Instead, her expectations for Germany worsened, which entered a recession in the first quarter. The European locomotive, according to the International Monetary Fund, will shrink this year by 0.3% due to “weak industrial production,” while next year it will rise by 1.3%.

Overall, the more developed economies will see a year out of stagnation, with the UK growing by 0.4% and the US by 1.8%. However, they also show great flexibility. “The shift in consumption toward services, which began after the pandemic, is almost complete in advanced economies, including tourism-dependent economies in southern Europe, and accelerated in many emerging and developing market economies during the first quarter,” the report says.

financial instability

Indeed, most large markets continue to resist a rush by central banks in 2022 to raise interest rates to curb hyperinflation. The International Monetary Fund notes that global inflation will decline from 8.7% in 2022 to 6.8% in 2023 and to 5.2% in 2024. “The fight against inflation continues,” the document prepared by the agency says. However, those prescriptions that have brought in the region rates from 0% to 4%, have side effects. Not only are they cooling the economy, they are also cooling the economy cause financial instability.

The box suggests a recipe that is, to say the least, complicated. First of all, central banks are required to continue to fight inflation. but, The crises of Silicon Valley Bank and Credit Suisse It revealed that the financial sector suffers from weaknesses that could endanger its daily life. For this reason, it encourages countries to inject liquidity in case of need, and at the same time they begin adjustments to rebuild their financial buffer reserves, with the greatest efforts focused on the most vulnerable and in the fight against climate change. “The priority remains to achieve a sustainable rate of inflation while ensuring financial stability,” the IMF says in the report.

The good news, according to the report, is that “so far,” the “wage and price spiral” appears not to have settled. This supports long-term inflation expectations remaining stable and monetary policy next year starting to ease. The document posits that in 2024 central banks will begin to ease up and lower interest rates, which should reinvigorate the credit-giving they have begun to constrain. This is the good news. The bad news is that uncertainty persists on several fronts: the war in Ukraine could exacerbate inflation and China continues to present a big question mark over the real estate sector, which could lead to “cross-border contagion effects”.

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