The Spanish economy is forecast to grow almost 2% this year, surpassing the central bank’s most recent forecast of 1.6%, according to Bank of Spain Chief Economist Angel Gavilan, noting an inflation slowdown and stronger-than-forecast growth at the end of last year and the start of 2023.

In addition, Spain’s economy should benefit from European Union-backed projects and the reopening of China’s economy, Gavilan said during a Wednesday news briefing. The central bank governor, Pablo Hernandez de Cos, also forecast growth rates of over 2% in 2024 and 2025.

Reuters reports that the country’s economy grew 0.5% in Q1 compared to Q4 last year, exceeding the Bank of Spain’s forecast of 0.3%.

The Chief Economist stated Spain would most likely revert to output levels registered before the pandemic in the second quarter of 2023.

However, within its annual report, the central bank cautioned that any forecasts made were still subject to a great deal of uncertainty. Factors include the war in Ukraine and the global economy’s evolution in terms of monetary policy tightening.

Furthermore, the preliminary wage increase agreement in Spain’s collective bargaining process unveiled last week was welcomed by Gavilan, which he stated should not have a considerable impact on the Bank of Spain’s inflation forecasts.

“We do not expect significant second-round effects in our central scenario…and see moderate wage growth over the coming years,” Gavilan said, who also predicts “a path of moderation in corporate margins.”

In March this year, the central bank reduced its forecast for the country’s consumer inflation to 3.7% in 2023 from a prior estimate of 4.9%, following an 8.3% figure in 2022.