He International Monetary Fund (IMF) does not stop emitting positive signals regarding Spain since the post-covid business cycle began with fiscal and monetary aid to get economies out of the most profound recessionary period since the crash of ’29 caused by the great pandemic. The autumn summit of the international organization will not be an exception either, because its predictions are once again positive for Spain.
The fourth GDP of the Eurozone will grow by 2.9% this year (one tenth above that of the United States, with which it marks the highest rate of activity among advanced economies), and 2.1% in 2025 (only behind, in 1 and 3 tenths respectively, of USA and Canadawith whom they will form the industrialized podium.
The autumn diagnosis of World Economic Outlook (WEO), the semiannual report of IMF economic forecastsleaves the triumvirate of Spain, the US and Canada as the only markets capable of getting on the supercycle of business, which is being talked about in these weeks prior to the North American presidential elections.
Analysts have been debating the real possibilities of the largest economy on the planet going beyond an economic period like the current one (fifteen years of growth below its potential, with specific threats of deflation and interest rates close to zero to stimulate investment and consumption, which ended up exacerbating capital funds with an inflationary spiral and an increase in the price of money) to a new, promising one, on which an increase in productivity that will engender a period of prosperity unprecedented.
The complex transition in business cycles
In this transit, the first vestiges of a full-fledged economic paradigm shift can already be seen. Aid to the industry among the partners of the G-7 and its increasingly numerous rivals from emerging economies (BRICS+), massive investments in the technology and renewable energy sectors have significantly stimulated demand and driven global dynamism above 3%. Specifically, the WEO certified a global GDP growth 3.3% in 2023 and risks 3.2% for both 2024 and 2025. These are the resources that replace the fiscal stimuli that generated the post-covid cycle. Just as the rate cuts are the monetary ones after, from the report of the powerful Financial Stability Department of the IMF, it praises the “ability of the central banks to control the most intense inflationary escalation since the oil crisis of the eighty”.
In fact, Tobias Adrian, director of this area of the Fund, explains that the increase in risks associated with the financial fragility of a rate adjustment like the current one and geopolitical vulnerabilities They could act as fuels that accelerate possible capital flights and return volatility to the markets. “More in the medium term, rather than imminently,” he clarifies.
This turning point reaches Europe with more questions, although with an unappealable reading: geopolitical risks They will determine the degree of chaos that the global economic order will assume. Despite this, the European Union has a double challenge on its table: the two reports from two former Italian prime ministers (Mario Draghi, on Competitivenessand Enrico Letta, on the Internal Market) that call for monetary efforts (of 800,000 million euros per year, according to the former president of the ECB) and integration (the use of Eurobonds to finance community strategic plans, unification of their capital markets and creation of exchanges that attract technological investments) that reveal a productivity gap that, if closed, would generate sufficient competitiveness in the European space to rival the US and China.
Spain, well placed to spur changes in Europe
The arrival of these new community resources (similar to the Next Generation but with annual budget allocations and massive contributions from the private sector, according to Draghi’s report) together with a more or less prolonged period of interest rates below neutral positions (in around 2.5%), it would mobilize activity even more. And the Spanish economy will do so, according to the IMF, in almost ideal conditions.
The international organization’s forecasts also show inflation at bay (still 2.8% this year, but 1.9% in 2025, with money made cheaper by the ECB) and with a slow but constant reduction in the rate. unemployment, which will go from 12.2% (2023), to 11.6% (2024) and to 11.2% in 2025.
Spain’s situation contrasts with that of its main euro partners. Germany will continue to suffer to get out of the recession of 3 tenths in 2023, with a flat GDP record this year and a pyrrhic growth of 0.8% in 2025. Also France (with flat growth of 1.1% between 2023 and 2025) and Italy, with the same paralysis despite being the European partner that most benefited from the Next Generation funds (GDP increase of 0.7%, 0.7% and 0.8%, respectively), will act as a hindrance to activity of the euro.
The IMF scenario depicts a climate of improvement in international trade, which will grow from 3.1% to 3.4% this biennium, and stability in the price of oil, which will moderate its rise to 0.9% this year and will reduce up to 10.4% in 2025 if the geopolitical tension does not prevent it.
The strength of the Spanish GDP is also confirmed by research services such as the BBVA forecasts, which equate it to that of the IMF (2.9% this year), although they raise it even more, to 2.4% next year, or those of Funcas , which even put it at 3%. The upward revision of the Fund is of special significance, because it is half a point more than its July prediction and one point above that of April, at its spring summit.
Active resilience in a tense geopolitical order
In its diagnosis, the WEO highlights the “general resilience” shown by the global economy in the last four years of the post-covid cycle. With the emergence of geopolitical conflicts and tension in international trade and logistics that distorted value chains and caused escalations in energy and food prices that fueled inflationary spirals with their credit restrictions and higher money prices and developed “multiple fragility” in different latitudes.
In particular, a pile of global public debt that will soon exceed 100 trillion dollars and indifference in budget consolidation. “Uncertainty continues to be very high and threatens the business climate,” says the Fund’s report, in the geopolitical and domestic fields after half of the world’s population has passed through electoral periods that leave many unknowns about fiscal policies. and the trade protectionist strategies that are going to be implemented. All of this, he predicts, “will add volatility to markets and vulnerabilities to economies.”
For example, the risk that the harsh process of disinflation, which has not caused great damage in terms of job destruction, will re-emerge. And, in this sense, it asks almost in equal parts that possible future inflationary impacts be contained with moderation in salary increases, but also in business profit margins. More specifically, the IMF requires companies to absorb part of their labor costs with their surplus profits.
Although it also leaves a message to the central banks. “Monetary policies remain above natural rates after acting as freezers of activity to contain inflation.” But now they must be made more flexible in order to relax credit and mortgage conditions and convey a change in the interest rate cycle. For this reason, “it would be pertinent” for the economic authorities to activate the automatic stabilizers that are necessary to also begin a period of adjustment of public accounts. Essential, he clarifies, to correct sovereign debts and to minimize stock market volatility, after a three-year period of increasing placement of bond issues to finance in the medium and long term the debt service payment obligations that they are beginning to have to address. “Especially since April,” he warns.
A strategy with a triple trajectory
Pierre-Olivier Gourinchaschief economist of the IMF, proclaims victory in the fight against inflation, which registered its global peak in the third quarter of 2022, at 9.4%. But after this success, not without bursts of second-generation prices according to the alert, it should not avoid putting into play a triple strategy, which grants “balloons of oxygen” to an atmosphere full of tensions. On the one hand, from the central banks, which are entrusted with accelerating cuts to generate employment, redirect the overvaluation of the dollar and, therefore, reduce the import of inflation of raw materials and manufactures denominated in American greenbacks and, in definitively, to stop possible disruptions in value chains.
Secondly, in the fiscal field, with measures aimed at consolidating budgets and cutting debt, so that they do not hinder activity or obstruct the expansionary path of monetary policies. And, finally, undertake a reformist agenda that affects the increase in productivity and that builds dynamic patterns that contribute to confront demographic aging, increase the resilience of economies, improve living standards, make their labor markets less vulnerable and gain in competitiveness.
In short, changes that promote technologies and roadmaps towards energy neutrality; That is, they facilitate the leap towards a digital and green economic supercycle with renewed steps towards multilateralism that overcomes the protectionism that has been installed in certain areas of the planet.
In the US, in the final phase of the electoral campaign, the economy has once again burst into the political debate. Of course, without lowering the soufflé of tension on the part of the Republican leader, but with the voters, especially the undecided ones, trying to scrutinize what economic program, that of Kamala Harris, in favor of maintaining the Bidenomics of subsidies to industry and the energy transition, or that of Donald Trump, with new tax cuts and tariff wars that could further deteriorate the deficit and catapult the debt, according to experts, it can bring them greater benefit. Americans, says Josh Hirt, of the analysis firm Vanguard, “have begun to calibrate the risks that appear in their vital and investment spectrum” in a near horizon in which they face that the supercycleif consummated, will also have to deal with budget balance and proper debt management.
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