Research Update: Spain Outlook Revised To Stable From Negative On Balanced Growth; 'A/A-1' Ratings Affirmed

Global geopolitical uncertainty and rising energy and commodity prices have led us to lower our 2022 GDP growth forecast for Spain to 6.1% from 7.0%. Despite worsening terms of trade, the medium-term outlook for Spanish GDP growth is favorable, with tourism positioned for a strong 2022-2023 recovery and €150 billion (11.5% of GDP) in Next Generation and EU budgetary grants to be disbursed from 2022-2027. Fiscal performance, although improving, continues to lag peers: Even excluding interest payments, Spain is likely to post deficits of above 2% of GDP through 2025. The government's recent modifications to the pension system have created some modest incentives for workers to delay retirement; more costly was the decision to index pensions, implying a social security

...- Global geopolitical uncertainty and rising energy and commodity prices have led us to lower our 2022 GDP growth forecast for Spain to 6.1% from 7.0%. - Despite worsening terms of trade, the medium-term outlook for Spanish GDP growth is favorable, with tourism positioned for a strong 2022-2023 recovery and 150 billion (11.5% of GDP) in Next Generation and EU budgetary grants to be disbursed from 2022-2027. - Fiscal performance, although improving, continues to lag peers: Even excluding interest payments, Spain is likely to post deficits of above 2% of GDP through 2025. - The government's recent modifications to the pension system have created some modest incentives for workers to delay retirement; more costly was the decision to index pensions, implying a social security deficit last year of around 2.6% of GDP, one of the highest in Europe. - We expect Spain to continue to post strong growth and run external surpluses, while benefiting from its membership in the EU and monetary union....

Research Update