MADRID (Reuters) – The International Monetary Fund expects Spain’s economic growth to slow in 2024 on higher prices and weaker demand before rebounding in 2024 to pre-pandemic levels*), it said in its national report on Wednesday.
Growth is expected to be weaker in the coming quarters, reflecting a drop in consumer confidence from the cost of living crisis and weak demand, the IMF said in its report. It said economic activity would pick up towards the end of the year, helped by spending from the EU recovery fund and improving supply.
“We do not expect a technical recession, but growth will be close to 0% in the last quarter of this year and the first quarter,” IMF Spain delegation Chief Dora Iakova said in a phone call with reporters.
Although the IMF warned of many downside risks, notably the impact of energy prices, it expects GDP growth of 4.6% in October, up from a previous forecast of 4.3%, and slowing To 2023 was 1.2%, higher than the average level of the euro zone countries.
The improvement was attributed to a strong labor market and particularly strong performances in tourism and other services sectors.
The country’s headline and core inflation rates Likely to stay above the ECB’s 2% target before 2024, while its industrial output is expected to hit pre-pandemic levels Early 2024, IMF in added the report.
Iakova said headline and core inflation will converge around 2024 4.5%.
While the report welcomes the swift introduction of government support to mitigate the impact of price increases, it regrets that these measures were not targeted and resulted in market distortions.
“Most of the fiscal support goes to measures that are untargeted and distort price signals, such as electricity tax breaks and fuel tax rebates. The latter are fiscally costly and benefits flow disproportionately to higher income households,” the IMF said in a report.