Thursday, December 9

The IMF lowers the growth forecast for Spain by half a point and leaves it at 5.7%

Kristalina Georgieva, the managing director of the International Monetary Fund.

Kristalina Georgieva, the managing director of the International Monetary Fund.

Global recovery continues but momentum has weakened, constrained by the pandemic and Spain is one of the countries whose economy will confirm this this year. This is clear from the last Report of Economic Outlook for International Monetary Fund, presented this Monday in Washington, which growth forecasts for Spain are lowered by half a point compared to July in 2021.

These are now in the 5.7%, still above the average of 5% expected for the euro zone this year but below the 5.9% estimated global growth. The new IMF forecast is slightly lower than that projected by the Government for this year, 6.5%.

It is in 2022 when Spain, according to IMF forecasts, will lead the strongest growth among advanced economies, with a projection that this expansion will reach the 6.4% (the Government projects 7% for next year). The new IMF forecast for Spain is 0.6 points higher to which the agency projected in July and a good figure, which is weighed down by the forecasts of national unemployment, which will continue unparalleled in the euro zone and in other advanced economies: 15.4% in 2021 and 14.8 in 2022. No country like Spain best represents the IMF’s finding that “the recovery of the working market it is significantly behind economic recovery ”in most countries.

And all this in a world where the IMF has underlined the great concern about growing global divergences in access to vaccines and in political responses and where it also warns of risks, including disruptions in supply chains or the rebound in many countries of inflation.


The Fund acknowledges that it makes “amidst high uncertainty” predictions that inflation will return to pre-pandemic levels in mid-2022 and links that lack of security to open questions such as which path the pandemic will follow, how long the problems in supply chains will last or how inflationary forecasts will evolve in this environment. He has no doubts, on the other hand, when advising that monetary policy “Must move a fine line between facing inflation and financial risks and supporting the economic recovery” and giving his recipe for how to deal with this situation. The IMF states, for example, that “central banks they must be prepared to act quickly if the risks of inflationary rises materialize in this unexplored recovery ”and it is urgent to“ prepare contingency actions ”, announce with“ clarity ”which inflation numbers in each case would lead to undertake those actions and“ act in line with that communication ”.

“Increased risks”

In global terms, the revisions to the forecasts made by the IMF in this last balance sheet are modest, with a discount of one tenth in the growth outlook for this year (which remains at 5.9%) and a maintenance of the calculation for 2022 of an expansion of 4.9%, but the agency warns that “in general the risks to the economic outlook have increased” and warns that general modest reviews “mask” large reductions in forecasts for some countriesespecially low-income and developing ones.

The Economic Outlook Report emphasizes that “large divergences remain a major concern,” problems that are a consequence of exacerbated inequalities. And in few areas are these enormous disparities greater than in the access to vaccines (with almost 60% of the population immunized in advanced economies while almost 96% in low-income countries have not received their doses). Therefore, and given that it is considered that “the highest political priority is to vaccinate adequate numbers in all countries and prevent further virulent mutations”, manufacturers and high-income countries alike are urged to “support the expansion of the regional vaccine production in developing countries through financial solutions and technology transfer ”.

Another “urgent priority” that appears in the report is the need to halt the increase in global temperatures and the growing health and economic effects of climate change. To this end, the IMF calls for “stronger concrete commitments” for the COP26 summit and that the promises of mobilization of 100,000 million dollars a year to help developing nations in this climate crisis be fulfilled.

Likewise, the focus is turned to the need for coordinated multilateral efforts to ensure liquidity to the worst hit economies and it is urged to accelerate the G20 framework created to restructure unsustainable debt.


Supply and inflation

Those are not the only political challenges the IMF points to. That list also includes the fractures in the chain of production and logistics of distribution of goods that have created supply problems and bottlenecks and are being “longer than expected, further fueling inflation in many countries.”

It is precisely this rise in prices that it deserves separate chapterliterally in the Economic Outlook Report. The rise in inflation stands out in countries such as the United States and Germany and in many emerging markets and developing economies, and it is also emphasized that “where food prices have risen the most is where food insecurity is highest, raising the weight in the poorest households and the risk of more social unrest ”.

The IMF also calls to “avoid unnecessary political accidents: from not raising on time andl debt ceiling in the United States to disorderly debt restructurings in the property sector in China ”. It also warns that “an escalation of trade and technological tensions, especially between the US and China, could weigh on investment and productivity growth and would raise more barriers on the road to recovery.”

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