Caixabank joins IMF and lowers Spain’s growth forecast

18 Oct 2021

Caixabank Research has joined the IMF in lowering its growth forecast for Spain in 2021 from 6.3% to 5%. The banking entity’s prediction is lower than the International Monetary Fund, which forecasts 5.7% growth after half a point reduction. 

This follows on from the National Statistics Institute (INE) revising GDP data for Q2 from 2.8% to 1.1%. The Executive has maintained the growth estimate for 2021 at 6.5%, rebuffing the INE reduction. 

The Caixabank experts have justified the decline in the “notable” downward growth revision made by the National Statistics Institute at the end of last month. Within their October report, advanced by Servimedia, “the growth prospects for the coming quarters do not worsen” and that there will be “a delay in the emergence of dammed demand,” which leads them to improve its forecast for 2022 by two tenths, now at 6.2%.

That said, for 2022, Caixabank’s predictions are gloomier than those of the government. The Executive of Prime Minister Pedro Sánchez places the rise in GDP in 2022 to be 7%, eight tenths higher than the bank.

In addition, Spain’s government forecasts ending the year with a budget deficit of 8.4%. The goal is to reduce the deficit to 5% in 2022, 4% in 2023 and 3.2% in 2024, according to an El País report.

The IMF is in agreement with the first part of the forecast, but believes that between 2023 and 2026 the deficit will stay over 4% of GDP. It forecasts the figure to be 4.4% in 2023 and 4.2% thereafter.

However, this means Spain would be in breach of the EU’s Stability and Growth Pact, for the next five years at least. The Pact sets a 3% ceiling for the deficit and 60% for debt, yet was suspended until next year due to the pandemic. The EU Commission is set to introduce a review of the budget rules on Tuesday, Reuters reports.