Yesterday, the International Monetary Fund (IMF) raised its economic growth forecast for Spain for this year to 1.5%, the highest rate in the European Union. And he was doing it while sending a global alert. "We are entering a dangerous phase in which economic growth remains low in historical terms and financial risks have increased, but inflation has not yet made a decisive turn."
This was indicated by Pierre-Oliver Gourinchas, chief economist of the IMF, in the preface of the report that the Fund presented yesterday as part of the spring meeting held with the World Bank.
This combination of inflation (more resistant than thought), and the destabilization of the banking system (result of the rise in interest rates in the fight against price increases), causes the global economic outlook to worsen in this update of forecasts in which the cumulative effects of the pandemic and the war in Ukraine persist, as the director of the IMF, Kristalina Georgieva, anticipated.
From a global growth of 3.4% in 2022, it goes to 2.8% in 2023, and 3% in 2024, a tenth less in each case compared to what was predicted last January. It is the lowest medium-term forecast in decades.
In a plausible alternative scenario with greater resilience in the financial sector, this growth could fall to 2.5% this year, the weakest since the 2001 global recession, excluding the initial covid crisis in 2020 and during the global financial crisis of 2009.
This extra drop of three tenths is explained "by a situation in which the banks, due to an increasingly high cost of financing and the need to act more prudently, reduce credit even more".
It goes from 2.7% in 2022 to 1.3% in 2023 and 1.4% in 2024. In this alternative scenario, growth in 2024 would fall below 1%.
Eurozone countries (from 3.5% to 0.8% in 2023) and the United Kingdom (from 4% to negative growth of 0.3%) are the most affected.
Spain drops from a growth of 5.5% in 2022 to a perspective of 1.5% this year, which represents an improvement of four tenths compared to January, and of 2% in 2024, with a loss of four tenths.
Spain remains the country with the highest growth in its environment of advanced economies, even above the United States (1% in 2023 and 1.3% in 2024).
The IMF lowers inflation for Spain by five tenths this year (4.3%), one point below the forecast for the euro zone.
"Inflation is much tighter than expected", the document indicates. The synchronization of central banks to raise interest rates should begin to bear fruit, but the labor market, which should begin to show signs of relaxation, continues to show strong resilience. In this way, the idea of having a "soft landing" as a result of this persevering inflation and the recent ups and downs of the financial sector in Europe and the USA recedes.
The IMF does not expect the global economy to return to pre-pandemic growth rates in the medium term. Looking to 2028, the growth forecast is 3%, the lowest medium-term projection since it began publishing its outlook in 1990.
The clouds of uncertainty are based on adjustments to the shocks recorded between 2020 and 2022 and recent turbulence in the financial sector, so that “recession concerns have gained prominence, while worries about persistently high inflation continue” .
Gourinchas warned that beneath the surface of an apparent economic recovery, "turmoil is building up and the situation is quite fragile, as a recent episode of banking instability reminded us", he insisted.
"More worrying is that the sharp tightening of policies over the past twelve months is beginning to have secondary effects for the financial sector," states the report. But he reiterates that regulators must remain tough in the fight against high prices. “The appropriate course of action depends on the state of the financial system. If it remains reasonably stable, as it has been until now, monetary policy should be firmly focused on reducing inflation," he explains.
The paper notes that, should a systemic financial crisis loom, a careful and timely recalibration of policy will be needed to protect both the financial system and activity. He says regulators and supervisors should act quickly against these tremors so they don't turn into a financial earthquake.
