The International Monetary Fund (IMF) has revised upwards its growth forecast for the Spanish economy in 2023. The IMF economists believe that Spanish GDP will grow by 2.5% this year and 2% in 2024, two figures that clearly exceed the euro area average (0.9% and 1.5%) and the large European economies.. This is reflected by the institution in its world economic outlook report published this Tuesday. In addition, in the document the agency points out that governments can help central banks in their fight against inflation by cutting public spending or raising taxes.

So far, the IMF forecast is the most optimistic with Spain among the big institutional analysts. The 2.5% predicted by the Washington-based organization exceeds the forecasts of the Bank of Spain (2.3%), Airef (2.3%), OECD (2.1%) and the European Commission (1.9%). In fact, it is even higher than the one that the Government itself prepared to design the General State Budget for this year.

The agency has raised its growth forecast for this year by one percentage point compared to its previous forecast published in April. In this way, the IMF joins the consensus of analysts, who have been improving their forecasts for Spain in recent months as the macroeconomic data published have brought positive surprises.. The resistance of the labor market, the strong recovery in tourism and a statistical revision by the INE of the growth data for the past semester have boosted expectations for 2023.

From the Ministry of Economic Affairs they point out that Spain's is “one of the biggest upward revisions” in the IMF forecast published this Tuesday. They also point out that Spain will have the highest growth of the main developed economies in 2023 and 2024, with an increase in GDP that will be almost triple that estimated for the euro zone (0.9%), thanks to the good performance of services and tourism.

However, there are already several analysts —among them, the Bank of Spain— who are warning that the economy is beginning to show signs of weakness. In June, employment data reflected a significant slowdown in job creation. High interest rates continue to wear down households, the recovery in the tourism sector is beginning to peter out, and high-frequency indicators such as the PMIs reflect an incipient slowdown in growth.

Globally, the IMF believes that the economy will slow down in 2023 and grow at a rate of 3%, five tenths less than last year. A moderate figure taking into account historical precedents. In the euro area the slowdown is especially significant. According to the IMF, the euro countries will go from growth of 3.5% in 2022 to one of 0.9% in 2023, which will then rebound to 1.5% in 2024. The bite of high interest rates around the world chokes households, while the possibility of further financial turmoil like the ones seen after the failure of Silicon Valley Bank and Credit Suisse last spring lingers.

Tax cuts and increases to help the ECB

Central banks are still struggling to control inflation, which is still at historically high levels, but prices are resisting more than expected. The IMF now believes that core inflation will decline more slowly than expected, especially in advanced economies, and has revised up its global inflation forecast for next year.

In this context, the institution headed by the Bulgarian economist Kristalina Georgieva sets “defeating inflation” as its number one political priority.. For this reason, the IMF recommends that central banks be relentless in their fight against inflation and that they not be tempted to take a break with rates prematurely.. “A restrictive position [in monetary policy] is necessary until there are clear signs that underlying inflation is cooling,” they point out.. In other words, rates should remain high for as long as it takes to see a clear cooling in prices.

In addition, the IMF urges governments to do their part in the fight against inflation and leaves a recipe. “Cuts in public spending or tax increases aimed at ensuring debt sustainability can further reduce inflation and shore up the overall credibility of disinflation strategies,” they argue.

Along these lines, the agency believes that the countries with the highest deficits and debt should draw up adjustment plans to reduce these magnitudes to their pre-pandemic levels.. For this reason, the IMF urges countries to undertake budgetary adjustments that allow them to build “fiscal reserves”, but without losing sight of the most vulnerable.

The bucket of ice water in the form of interest rate hikes with which the European Central Bank (ECB) wants to cool the economy to subdue inflation is driving families and companies away from the credit markets. According to the Bank Loan Survey released this Tuesday by the Bank of Spain, credit institutions are increasingly reluctant to lend money and, when they do, they demand tougher conditions from their customers.. Consequently, families and companies are giving up borrowing. What is causing a collapse in the granting of mortgages and in business investment that will end up weighing down economic growth.

In the second quarter, Spanish banks continued to tighten access to credit for households and companies, although somewhat more moderately than at the start of the year. The majority of credit institutions were stricter when deciding whether or not to grant a loan and those that did grant were granted with tougher conditions. In other words, higher interest rates, lower amounts or more stringent guarantees required. A trend that the banks themselves believe will also continue in the third quarter of the year.

The banks justify this closing of the credit faucet in that they see more and more risks in the economic panorama and are less willing to tolerate them. In addition, they point out that their access to financing has also been made difficult by rate hikes, which has caused them to have fewer funds available. A trend that they expect to continue in the coming months. Consequently, the percentage of credit applications that banks reject has continued to grow.

In this context of worse credit conditions, households and companies are increasingly renouncing borrowing. Demand for home purchase mortgages fell again for the fourth consecutive quarter, although it did so more moderately than at the start of 2023.

The increase in the cost of loans, with higher interest rates, is the main reason that is dissuading economic agents from borrowing. In the case of companies, the drop in investment is also a compelling reason to explain the drop in demand. While, for households, the evolution of housing prices and the drop in consumer confidence are two key factors.

Banks have restricted access to credit for companies in all sectors of the economy, although the most affected activities have been construction, real estate and manufacturing.. In the same way, the demand for financing continues to decline in all sectors, a trend that will also continue in the next quarter, say the banks.

The economy begins to cool

The closing of the credit faucet is an expected and desired consequence by the ECB of its policy of sharp rises in interest rates. The information transferred by the banks reflects that rate hikes are already displaying their power in the banking channel. Business and household investment is slowing down in a context of growing weakness in the European economy.

“The survey does not give an optimistic view of economic activity in the coming months. With credit conditions tightening and loan demand weakening, investment activity will weaken further. For the ECB, this will help ease inflationary pressures further down the line,” the ING analysts say.

The data from this survey are published just two days before the ECB governors meet in Frankfurt to approve, predictably, a new rise in official interest rates of 0.25 points. Although price rises have been slowing down in the euro area for months, the ECB is wary and will not stop raising interest rates until its forecasts clearly show that expected inflation in the medium term is reduced to 2%.

The Institute of Economic Studies (IEE) has published this Tuesday its semi-annual report on the economic situation, in which it has revised upwards its growth forecast for the Spanish economy for both 2023 and 2024. The CEOE study center has focused on the context of “political uncertainty” unleashed after the elections last Sunday, a scenario in which the president of the IEE, Íñigo Fernández de Mesa, has asked to avoid “extremes” in the formation of the Government. “Political stability is going to be very important so that the structural reforms we need can take place,” he stressed.

The employers' think tank has raised its growth forecast for this year by four tenths, up to 2.2%, one tenth below the forecast of the Bank of Spain and AIReF and three below the advance of 2.5% forecast by the IMF. “The Spanish economy has performed better than initially expected during the first half of 2023,” explains the IEE report, which attributes the good progress of the economy to the decrease in the costs of raw materials, the recovery of tourism, the good performance of exports and the strength of the labor market.

In addition, the IEE has also raised the Spanish GDP growth forecast for next year by two tenths to 1.5%, although it predicts that this progress will be “insufficient” to reduce the unemployment rate. “The tightening of monetary policy could result in a more moderate recovery by 2024,” the think tank qualifies. This forecast is more pessimistic than that of other organisms. For example, the IMF and AIReF predict a growth of the economy of 2% by 2024, while the forecast of the Bank of Spain reaches 2.2%.

Despite the upward revision, the IEE predicts a “notable slowdown” in economic activity in the second half of 2023. According to the think tank, one of the ingredients that will contribute to the economic slowdown is “political uncertainty.” “The result of the elections makes it difficult to form a government and creates a scenario of political uncertainty that increases the risk of a slowdown in the Spanish economy,” the report assesses, which explains that a context like the current one “negatively influences decisions and economic activity, which, if sustained over time, could lead to an additional brake on investment projects and employment.”

Faced with this situation, the IEE calls for “greater stability and predictability”, as well as an economic policy focused “on creating a more favorable climate for companies”.. For this, Fernández de Mesa has urged during the presentation of the report to “avoid extremes” in the formation of the future Government, which he has asked to defend the company for the “good economic development of the country”. The president of the organization pointed out that the company is in a “very weakened” situation due to the “significant” increase in labor, tax and financial costs.

deficit concern

The report published this Tuesday points out a series of pending tasks for the future government, including a multi-year budget adjustment plan that reduces public spending and strengthens the business environment and structural reforms that boost productivity and potential growth of the economies.. “It is essential to maintain the sustainability of public finances, meet fiscal targets and consider contingencies arising from financing conditions,” adds the IEE, which points out that Spain will close 2023 with a deficit of 4.3% of GDP. In 2024 it would drop to 3.8%, but it would remain far from the 3% projected by the current government in office.

For the employers' study center, the current political situation makes it difficult to carry out the budgetary adjustments that will require the approval of new European fiscal rules in the not too distant horizon. In fact, the IEE points out that, in the best of cases, the General State Budgets for 2024 will see the light of day with “a strong delay”, if there is a government and sufficient parliamentary support to approve them.. In addition, the IEE adds that “if tax increases were to be incorporated again, the expectations and distrust of the agents would worsen even more.”

As for inflation, the CEOE study center predicts that the price moderation process in which the Spanish economy is immersed “will be slow, given the persistence shown by underlying inflation”. Specifically, the IEE, which warns of the risk of rising prices passing through to wages, forecasts that the general CPI will fall below 4% in 2023 and approach around 3% in 2024. On the other hand, core inflation would end the year at an average of more than 6% and would not converge with the level of general inflation, around 3%, until 2024.

One of the fundamental requirements to be able to collect the contributory unemployment benefit, better known as unemployment, will be to have contributed for a minimum of 12 months. However, those people who cannot access unemployment because they have worked less than a year, may be entitled to a subsidy for insufficient contribution or unemployment subsidy.

“Its duration will depend on the number of months contributed and whether or not you have family responsibilities,” explains Social Security. Also, “the contributions that serve to recognize this subsidy may not be taken into account to access a future contributory benefit.”

Amounts and duration of this financial aid

The amount of this subsidy is equal to 80% of the public multiple-effect income indicator (IPREM), that is, 480 euros per month. This help can be received for a period of 21 months, as long as six or more months have contributed, and if you have family responsibilities.

“In this case, the right will be recognized for six months, and it can be extended for periods of 6 months until its final duration,” the agency specifies.. Therefore, the person who meets these requirements will receive total aid at this time of 10,080 euros.

However, if you have family responsibilities and have contributed for 3, 4 or 5 months, the subsidy will last 3, 4 or 5 months, respectively. “If you do not have family responsibilities, the subsidy will last 6 months, if you have contributed 6 or more months,” they add.

Requirements to be able to collect this aid

These are the general conditions that must be met:

It is rare, but it may have happened to everyone at some time: is it normal to be asked for your ID when paying with a card in an establishment? It is not usual, but it can happen and there is no surprise. From the Bank of Spain they have published a post on their Banking Client portal to resolve the doubts of citizens in this regard.

From the Bank of Spain they warn that there are no laws that establish that this is mandatory, although it depends more “on the decision of each commercial establishment”. The most obvious reason: to avoid fraud and that users can buy with a card that is not theirs. It is a practice, they say, inherited from a time when credit and debit cards did not have the current security measures.

It's an 'extra security measure'

Currently, credit cards have a chip and pin as a security measure, in addition to 'contactless' technology, which makes payment by card, in general, a secure transaction. However, there are establishments that continue to ask for the DNI as an 'extra' security measure, to verify the identity of who is buying.

From the Bank of Spain they recommend that, although it is not generally necessary, if they ask us for the DNI when paying with a card, we accept it, since it is a simple security measure. If you cannot or do not want to deliver your DNI, it also works for the same purpose to deliver your passport or driving license.

The banking institution also invites you to request a copy of the transaction, as well as review the amount entered into the dataphone, each time you pay by card.