Spain

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile EU and Economic and Monetary Union (EMU) memberships will provide ballast in the face of rising external risks. Fiscal consolidation will take place only gradually, with limited progress on cutting Spain?s structural social security deficit -- High inflation is likely to weigh on confidence and growth into 2023. -- The 2022 budget deficit should come in better than official projections, as surging tax receipts and a falloff in COVID-19-related expenditure lower net borrowing requirements. -- General elections are set to take place by December 2023. Spain?s current government lacks a parliamentary majority, complicating its ability to implement policy shifts. -- The fiscal outlook

...For the remainder of 2022 and into 2023, Spanish households, the most important contributors to GDP, will likely attempt to rebuild savings in the face of a global energy price shock, while the European Central Bank (ECB) tightens its monetary policy. This implies growth will slow toward 1.1% in 2023, before recovering to just over 2% in 2024. Softening private demand might limit...

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