Spain's growth projected to moderate from 5.2% in 2022 to 1.1% in 2023

Output is projected to reach its pre-pandemic level by early 2024. Headline inflation is expected to continue to moderate gradually in 2023 reflecting a high base in 2022, the reduction of supply bottlenecks, and some normalisation of global fossil fuel prices, the IMF noted.

Nevertheless, both headline and core inflation are likely to remain above the 2-per cent target in the near term, it said.

Though economic activity in the country remained resilient in 2022 despite the new headwinds posed by the fallout of Russia-Ukraine war, elevated global energy and food prices, the weakening of trading partners’ growth, deteriorating consumer and business confidence, and rising interest rates have slowed the recovery of output, according to the IMF.

Strong rebound in tourism and other services supported growth last year and employment surpassed its pre-pandemic level.

Elevated inflation in 2022 was largely caused by surging energy prices and persistent supply constraints. After reaching double-digit levels in the summer, headline inflation declined to 5.8 per cent in December, reflecting a drop in European gas prices and the impact of energy support measures.

Core inflation remains above 6 per cent due to a gradual passthrough of higher energy costs to broader prices and, possibly, diminishing spare capacity in the economy. Wage pressures have been contained so far.

Fibre2Fashion News Desk (DS)