The Spanish economy could suffer less than expected this year and end 2022 with a growth of 4.3%, that is, three tenths above the last forecast, according to the report on the Outlook for the Global Economy ( WEO, for its acronym in English), presented today by the International Monetary Fund (IMF).
However, not all are joys for the Spanish economy, since the horizon that arises for 2023 is much darker than the scenario that was glimpsed just three months ago, when the IMF believed that our country could grow at least 2% , despite inflationary pressures, the strength of the dollar against the euro and the rise in energy prices resulting from the war in Ukraine.
According to the international organization, the Spanish economy will end 2023 with a modest advance of 1.2%. It should be remembered that in April the forecasts started at 3.3%, which highlights the rapid speed with which the economic situation has deteriorated. Even so, it is one of the best in its environment, since Germany and Italy would end next year in negative if the IMF forecasts are fulfilled. The euro zone would grow around 0.5%, while the United Kingdom would reap 0.3%.
For this year, however, the figures are more optimistic, with Europe growing by an average of 3.1% (it has improved by half a point), which places 4.3% of Spain in a privileged position (in April the forecast pointed to 4.8%, but in July the IMF cut it to 4%).
Globally, the forecast for this year has not changed, with an estimated growth of 3.2%. However, it has dropped to 2.7% for the next financial year, two tenths less than the figures that were used three months ago.
“Persistent inflation and the slowdown in the Chinese economy” are the two determining factors that are putting the world economy in check, a scenario that has become even more complicated due to the effects of the war in Europe, both because of the direct implications that both the conflict and the consequences arising from the economic and trade sanctions imposed by the European Union and the US on Russia for invading Ukraine.
The prospects, especially for 2023, are not at all optimistic. Moreover, this is the third consecutive time that the IMF has been forced to revise them downwards. And Spain is not among the worst unemployed. According to the data handled by the agency, at least a third of the world economy will enter a recession this year or at the beginning of the next. Revenues fall and prices rise. For both homes and businesses. The situation is far from improving: “It is much more likely to get worse,” in the words of IMF Managing Director Kristalina Georgieva.
The three economic engines of the world, the United States, China and the euro zone are stagnating, although at different speeds. According to IMF data, the disruptions caused by inflation (and the rate hikes carried out by central banks around the world to combat rising prices) “will reopen wounds that were not fully healed after the pandemic Therefore, the conclusion is clear: “The worst is yet to come, and for many people, 2023 will be a year of recession.”
Europe bears the brunt of the cut in economic prospects for 2023, largely due to the invasion of Ukraine by Russia and the energy crisis that the continent is suffering, with prices at record highs, and which is weighing down the ECB’s efforts to control inflation. The euro zone would achieve a positive result of 0.5% next year, which means going back more than half compared to the forecasts that were handled at the beginning of summer.
The United States -currently in a technical recession after two consecutive quarters with negative GDP- could see its economy grow by 1% in 2023 (far from the average 2% it has registered over the last decade). China would also be well below its average growth (almost 9%) and would remain at just over 4% as a result of the real estate crisis that the country is experiencing and the continuous confinements and closures of activity due to its zero tolerance policy against new outbreaks of Covid-19.
And despite this environment of widespread slowdown, inflation shows no signs of abating. According to the figures handled by the IMF, global prices could continue to climb until they reach a maximum of 9.5% before the end of the year, to begin to decline progressively during 2023 and reach 2024 with an inflation of 4, 1%.
Regarding the risks facing the world economy, the IMF points out, first of all, the increasing possibility that countries will fail to react in their fight against inflation, both by tightening their monetary policy too much and by failing to get its fiscal policy right in an environment of high volatility.
On the other hand, the strength of the dollar, which in the case of the euro has broken parity and climbed above levels not seen for two decades, could “lead investors to safe-haven values”, which would automatically translate on inflationary pressures and financial risk in emerging and developing countries. A debt crisis in these regions is more than likely, according to the report.
The IMF is also concerned about the escalation of tensions around the war in Ukraine and its consequences if the energy crisis worsens. Interestingly, the WEO report shows an improvement in the forecasts for the Russian economy for 2022, which goes from falling 6% to falling 3.4%. It also improves the scenario in 2023, from a drop from 3.5% to 2.3%, revealing the relative effectiveness of international economic sanctions against the Vladimir Putin regime.
If the risks identified by the IMF materialize, or the situation continues to worsen drastically around the world, the agency believes that there is a 25% chance that the world economy in 2023 will grow below the historical minimum of 2%. The worst case scenario contemplated by the WEO report is a meager growth of 1%. The probability of this being the case is less than 15%.
