Economic indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Spain has been in the midst of a balanced economic recovery in recent years; although the COVID-19 crisis led the country into an unprecedented downturn in economic activity, with the deepest contraction among EU member states. Nevertheless, the Spanish economy expanded firmly in 2021 (5.1%) and 2022 (4.3% - IMF), also thanks to the recovery of tourism activity and the resilience of the labour market. After decelerating towards the end of the year, GDP growth is set to remain subdued at the beginning of 2023. Headwinds are represented by high energy prices, low confidence of economic agents and an uncertain geopolitical context. The implementation of several reforms and investments under the Recovery and Resilience Plan are expected to lead to an increased dynamism in aggregate demand in the second half of the year, with overall growth projected at 1.2% for 2023, followed by 2.6% in 2024 as per the IMF forecast (1% and 2%, respectively, according to the EU Commission).

Spain’s public finances deteriorated swiftly as a consequence of the COVID-19 pandemic and the Russia-Ukraine conflict. Overall, the EU Commission estimates that the measures taken in 2022 to mitigate the impact of high energy prices (including the reductions of VAT on electricity and gas, the exemption from the tax on the value of electricity production, a 20 cent/litre fuel rebate and subsidies to low-income households and to certain economic sectors) amounted to around 1.6% of GDP. Such expenses were partially offset by increased tax revenue, resulting in a reduction of the public deficit to 4.5% in 2022 (it was 6.9% one year earlier according to the EU Commission). In 2023, the general government deficit is projected to narrow further (4.2%) amid a weaker macroeconomic scenario. Similarly, the debt-to-GDP ratio, at 113.6% in 2022, is expected to follow a downward trend in the forecast horizon, at 112.1% this year and 110.1% in 2024 (IMF), although the country's net foreign debt remains among the highest in the European Union. On the back of a strong increase in energy and food prices, inflation reached 8.8% in 2022 but showed signs of deceleration towards the end of the year. The IMF expects it to slow gradually to 4.9% and 3.5% in 2023 and 2024, respectively, but risks resulting from a more rapid wage adjustment and the relinking of pensions to inflation remain.

The Spanish labour market remained resilient during the pandemic. The unemployment rate is set to remain stable between 2022 (12.7%) and 2023 (12.3%), with a further decrease to 12.1% in 2024 (IMF). Wage growth should keep a slower pace than prices this year and only grow above inflation in 2024. Spain remains a country with strong inequalities: according to the latest data by Eurostat, 28% of the population was at risk of poverty or social exclusion in 2021 (the fourth-highest level in the EU), despite a relatively high GDP per capita (USD 46,551 in 2022 – IMF).

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