The OECD raises Spain's GDP growth to 2.1% in 2023 and to 1.9% in 2024

The harmonized inflation rate will remain at 3.9% this year and also next year

MADRID, 7 Jun. (EUROPA PRESS) -

The Spanish economy will grow this year and next year above the estimated average for the euro area, according to the Organization for Economic Cooperation and Development (OECD), which has revised upwards its GDP expansion forecasts for Spain for 2023 and 2024 , when the country will benefit "from considerable public spending", linked to the Recovery, Transformation and Resilience Plan (RTRP).

According to the new projections, contained in its 'Economic Outlook' report, Spanish GDP will grow this year by 2.1%, significantly below the 5.5% registered in 2022, but four tenths above the OECD forecast for Spain published last March, while facing 2024, the organization has raised its forecast by two tenths and now expects the Spanish economy to grow by 1.9%.

Thus, the OECD forecast is the same as that of the Spanish Government, which maintained growth for this year at 2.1% in the stability plan sent to Brussels, but not that of 2024, since the Executive of Pedro Sánchez estimates a rise in GDP of 2.4%, above the 1.9% estimated by the OECD.

In this way, Spain will continue to grow above the average for the euro zone, for which the 'think-tank' of advanced economies anticipates an expansion of 0.9% in 2023 and 1.5% in 2024. In fact, the Spanish economy, despite the slowdown compared to 2022, will record the highest GDP growth among the main economies in the Eurozone.

Specifically, the OECD forecasts that Germany will stagnate in 2023 and grow by 1.3% in 2024; France 0.8% and 1.3%, respectively; and Italy 1.2% this year and 1% the following.

"Faced with a challenging environment in the context of Russia's war of aggression against Ukraine, the Spanish economy has held up remarkably well," the OECD highlights in its analysis, noting that business and consumer confidence has improved since last fall, although consumer confidence remains very low.

It also points out that Spanish GDP growth will benefit from considerable public spending linked to the Recovery, Transformation and Resilience Plan (RTRP), while warning of various risks to the outlook, including an escalation of the war in Ukraine that could rising energy prices and increasing macro-financial vulnerabilities, as rapidly rising interest rates could increase the risk of financial contagion through the global financial system.

Regarding the evolution of prices, the organization is confident that the general harmonized inflation rate will moderate this year to 3.9% from 8.3% last year, which is three tenths less than what was forecast last year. March, while for 2024 the rate will remain at the same level, one tenth less than previously expected.

However, the OECD is somewhat less optimistic regarding the evolution of core inflation, which excludes the impact of energy and food, since it expects a moderation to 4.8% this year, compared to the 5% estimated in March, while for 2024 it maintains its expectation at 3.7%.

In this way, the general inflation rate in Spain this year would remain well below the average for the Eurozone, estimated at 5.8%, although by 2024 the OECD forecasts that the rise in prices among the Twenty will be less intense than in Spain, with an average rate of 3.2%.

Likewise, while this year underlying inflation in Spain will be slightly lower than the 5.4% estimated for the euro zone, next year the Spanish figure will be one tenth above the average of 3.7% for the euro zone.

On the other hand, the forecasts contemplate that the unemployment rate will fall to 12.8% from 12.9% and will drop to 12.4% next year, which, together with the moderation of inflation, will support the household consumption.

In its new macroeconomic projections, the OECD is confident that the negative imbalance in Spain's public accounts will improve this year and next, partly due to the prospect that some of the support measures for households and companies to cope with the increase of costs end in June 2023, although the VAT cut on food and subsidies on transport fares are expected to be extended until the end of 2024.

However, the organization foresees that the tax cuts on energy will be partially eliminated in 2024 and, in general, it points to fiscal policy being slightly restrictive during 2023-24, allowing the public deficit to decrease to 3.5 % of GDP in 2023 and to 3.2% of GDP in 2024 from 4.8% last year. On the other hand, the Spanish government foresees that in 2024 the public deficit will be below 3%, half a point less than the estimate by the OECD.

As for public debt, the 'think tank' projections for advanced economies anticipate a slow decline in the ratio to GDP to 110.8% this year and 109.9% in 2024.