The IMF cuts its growth forecast by one point to 4.8%, but leaves it above the Bank of Spain

The International Monetary Fund (IMF) limits the impact of the war in Ukraine on Spain's economic growth in 2022 to one percentage point and gives the most optimistic forecast among the main ones known so far: 4.8%. For 2023, the organization estimates an increase in economic activity of 3.3%, just 0.5 integers less than before the invasion of Russia and well above the eurozone as a whole (2.8% this year and 2. 3% the next) and its main comparables.

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These expectations remove the threat of stagflation (inflation without growth) and rule out the risk of recession. The forecast for the increase in prices remains at an average of 5.3% this year in our country, in line with the eurozone as a whole, and below other estimates that have been presented recently. The main danger for this scenario comes precisely from the general rise in prices (infected by the impact of the war on the international oil and gas markets), due to its impact on the real spending capacity of households, business margins [capacidad de obtener beneficios de los ingresos] and on the foreign sector.

The government recently approved a crash plan (of 6,000 million euros and another 10,000 in guarantees and financing) to temporarily alleviate these effects of inflation, especially painful for families with less income and savings. And it is waiting for the approval by the European Commission of the “Iberian exception”the proposal by Spain and Portugal to limit the price of gas in the electricity bill setting system.

“On the fiscal side, the margin of action has already been eroded in many countries due to spending [público] related to Covid ”, recalls the IMF. “Debt levels have risen significantly and the extraordinary fiscal support was expected to be removed in 2022 and 2023,” he continues, warning: “War and the impending rise in interest rates will further reduce fiscal space in many countries. ”.

Among them is Spain, with debt to GDP that it sees below 120% of GDP, although not below 110%. “The war in Ukraine has exacerbated two difficult political dilemmas: tackling inflation and safeguarding the recovery; which implies deciding between supporting the vulnerable and rebuilding fiscal buffers”, regrets the IMF.

The expectations published in recent weeks established a reference range for 2022 that ranged from 4.1% growth in real GDP (gross domestic product) from BBVA Research up to 4.5% from the Bank of Spainwith the Funcas analysis center at 4.3% and the Independent Authority for Fiscal Responsibility (AIReF) at 4.2%.

The government will present updating its macroeconomic chart in the Council of Ministers on April 26 with this background, and in a context of extreme uncertainty. His last forecast was 7% growth, on which he designed the General State Budgets, with a starting hypothesis that the war has completely collapsed.

On the new estimates, the Executive is currently building the stability program that it has to send to the European Commission before the end of this month, key for the requests in June on the items of the European recovery funds. On this occasion, in addition to the transfers, which in 2022 will approach 25,000 million euros, the loans will be demanded, which will exceed the planned 70,000 million, according to sources from the Ministry of Economic Affairs.

Highest growth among comparable economies

The growth estimated by the IMF for Spain after calculating the impact of the invasion of Ukraine is the highest among comparable economies in the eurozone. Among other reasons, because our country suffered the hardest and most lasting blow in the pandemic, given the greater weight of tourism over economic activity as a whole, which precisely faces in this 2022 and in 2023 the delayed recovery due to health restrictions.

Italy suffers the largest total cut in the estimates of the body chaired by Kristalina Georgieva: 1.5 points in 2022 and another 5 tenths in 2023 (see graph), up to growth of 2.3% and 1.7%, respectively. Although it would also avoid stagflation. Meanwhile, the biggest snip for this year is taken by Germany, of 1.7 percentage points, up to 2.1% increase in real GDP.

The IMF highlights the great imbalance in Spain with the unemployment forecast, which it sees at 13.4% this year and even close to 13% during the next year, while in the eurozone as a whole unemployment is lower, 7.3 % and 7.1%, respectively.