Spain will need at least four years to return to pre-pandemic GDP levels. That latest batch of forecasts of the International Monetary Fund (IMF) predicts the growth of the Spanish economy at 4% this year and 2% next year – eight tenths or the hit on the activity of the 2020 health crisis by the first quarter of 2024. That is, after the rest of the major European countries and what has been forecast so far. For the current year, the cut in the Spanish growth forecast is greater than the euro area average (two tenths), albeit from a higher level (4.8% versus 2.8%). The cut for 2023, when Spain will grow almost twice as much as the average of the common currency countries, is consistent: 1.3 versus 1.1 percentage points.
The deterioration in growth forecasts for 2022 is consistent with the general slowdown in growth forecasts, with inflation and rising interest rates taking their toll, and in the face of a winter when gas supplies are stretched across much of the continent. Spain is an exception in this area thanks to its powerful network of regasification plants and the wide range of suppliers. But the slowdown in industry and activity in the rest of the bloc would eventually take its toll.
Before the IMF made public its downgrade to growth forecasts, it was the turn of the Bank of Spain and the European Commission. The former in June kept its GDP forecast for 2022 at 4.1% and 2023 at 2.8%, respectively four and a tenth lower than forecast in April. Less than two weeks ago, the Community Executive did the same with the 2023 macro picture — with a sharp cut from 3.4% to 2.1% — though it kept its year-to-date forecast unchanged: 4%, the same as a currency fund. For its part, the Spanish government expects the economy to grow by 4.3% in 2022 and 2.7% in 2023.
Because it is a mere update of forecasts and not a detailed inventory of the state of the global economy, the euro-zone body chaired by Kristalina Georgieva only releases figures for the four largest euro-zone countries: Germany and Italy — which reflect GDP levels before the crisis in the second half of 2023—France—which will do so by the end of 2022—and Spain.
The biggest cut in the forecast for next year is expected to come in Germany, a major industrial locomotive and – by far – most dependent on Russian energy, whose expansion will be reduced by nine-tenths (up 1.2%) this year and the next at 1.9 points (down to a meager 0.8%). In Berlin, the probability of a recession – two consecutive quarters in the red – is already around 25%, according to the IMF technicians.
The Italian exception
France, for its part, expects its growth this year and next year to be reduced by six and four tenths to 2.3% and 1% respectively. And the big surprise is Italy: despite making a significant cut in 2023 (one point down, down to a very meager 0.7%), the fund believes its economy will grow significantly more this year (seven-tenths) than previously expected , and scores a 3% expansion. The reason? “Improved Prospects” for both the tourism sector and industry. The latter is still paradoxical: it’s a country heavily dependent on Russian gas and the sudden halt by Italy’s main trading partners is unlikely to go unnoticed. A week ago the IMF itself located After Hungary, Slovakia and the Czech Republic, Italy is the fourth EU country in which a Russian gas blockade would leave the biggest economic dent, ahead of Germany.
In a community key, however, the improvement in activities in the transalpine country “is more than seen [negativamente] offset by “significant cuts” in the remaining single-currency powers “reflecting both the impact of the war in Ukraine and the assumption of tightening financial conditions” after part of the European Central Bank and net debt purchases were withdrawn following the recent rate hike On the other hand, the fund’s economists believe that European funds will continue to support economic activity “in a large number of economies” in the old continent, which is its main bullet today as the recession drums are beating louder and louder.