Spain Economic Outlook. March 2023

Summary

GDP growth is revised upwards in 2022 and 2023 to 5.5% and 1.6%, respectively, and downwards in 2024 to 2.6%. The Spanish economy is holding up better than expected, although persistent inflation and the expectation of higher interest rates worsen the growth scenario for next year.

Key points

• Key points:
• Economic growth will moderate in a context of inflation and higher interest rates. Global GDP is expected to grow by 2.8% in 2023 and 3.3% in 2024 after rising by 3.2% in 2022. The main risk is a more persistent inflation.
• In Spain, the economy is resilient in the face of high energy prices. Bottlenecks are disappearing and domestic demand is supported by savings accumulated during the pandemic and by some public policies
• The strength of activity explains why inflation has not fallen further, and threatens the recovery of consumption and investment. Higher interest rates could subtract about one percentage point from GDP growth in the 2023-2024 biennium. In addition, some recent measures may slow private investment growth.
• Upside risks to inflation and the cost of financing remain. The imbalances in public finances need to diminish and reduce price pressures. The reform effort should continue.

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