spanish economy This year it will grow by 2.4%, two tenths more than predicted in September, but the slowdown in 2024 will be larger than expected, with growth of 1.7% compared to the 1.9% forecast. autumn economic forecasts Submitted this Wednesday by. European Commission which confirms that: The moderate course of inflation will continue in Spain and this public deficitIt will remain above the 3 percent threshold in both 2024 and 2025 as EU rules come into force, despite the gradual elimination of measures taken to mitigate the impact of high energy prices. Stability and Growth Pact.
New analysis from Brussels continues to give ground Spain is the locomotive of the European economy It lost momentum this year due to the increase in the cost of living, the weakening of foreign demand and the tightening of monetary policy. Moreover, the Spanish economy will continue to grow above other powers in the Eurozone. Germanywhich will record a negative GDP (-0.3%) Holland (0.6%), Italy (0.7%) or France (%one). This development led the Commission to revise downwards for the second consecutive year the growth forecast of the euro zone and the EU for this year of 0.6% (0.8% in September).
Despite this general slowdown, the new macroeconomic scenario envisaged by Brussels in terms of growth is positive. Spain will continue to grow above the European average in 2024 and 2025 thanks to domestic demand, which is expected to be the “main driver of growth” from now on, supported by greater increases in real household income and continued flexibility of regulations. .
Elements that would most help stimulate the economy include implementing the recovery plan and accelerating payments to final beneficiaries; This will especially help sustain investments in machinery and equipment. “As a result, GDP is forecast to grow by 1.7% in 2024, then accelerate slightly to 2% in 2025, when the impact of the recently approved RRF loan component will provide an additional stimulus to growth-promoting spending,” states the Commission. in his report.
The risks are not going away and point to a long-term impact of the tightening in financial conditions on demand, especially considering that external debt in the public and private sectors remains high, although decreasing. But community experts say the increased purchasing power of households and the healthy financial position of households and companies “can ease barriers to consumption and investment, thanks to lower leverage and the liquidity that has accumulated in recent years.”
Labor market resilience
Regarding the labor market, the report reflects the decline in the proportion of temporary workers in the private sector, which supports sustainable job creation and resilience in this field this year, despite the slowdown in employment growth observed since the summer. Therefore, “the unemployment rate is expected to fall to 12.1% in 2023 and continue to improve over the forecast horizon, rising to 11.6% and 11.1% in 2024 and 2025, respectively.” Forecasts also expect a “moderate” and “consistent” salary increase with the thresholds set in the multi-year agreement signed last May; which “should not significantly impact cost competitiveness.”
New forecasts also offer a positive horizon regarding the development of inflation. Brussels expects Spain to close the year with 3.6% inflation, thanks to softening prices in the economy. Core inflation, which excludes energy and food, is also expected to gradually moderate over the forecast horizon, falling to 3.4% in 2024 and 2.1% in 2025.
Open over 3%
In terms of the development of the public deficit, it will continue to decline, albeit more moderately, compared to 2021 and 2022, due to lower than expected indirect tax revenues due to the slowdown in imported goods inflation. Moreover, on the expenditure side, the increasing cost of pensions and interim consumption caused by indexation to inflation trigger the increase in current expenditures, the Commission explains, also mentioning the two measure packages worth 2.7 billion approved in May. Mitigating the impact of high energy prices, including extension of VAT, reductions in essential foodstuffs and direct support to the road and maritime transport sectors. All this means that Spain will end 2023 with a gap in public accounts of 4.1% of GDP.
Brussels for 2024 and 2025, if current policies are implemented government Pedro SánchezThe deficit will continue to fall to 3.2% next year, with savings from phasing out energy-related measures being the main driver of this reduction. Considering that the impact of revenue measures such as financial institutions tax or solidarity wealth tax on the budget will end at the end of 2024, forecasts predict a slight increase in the budget deficit to 3.4% in 2025. Regarding debt, Brussels’ forecast is for debt to fall to 107.5% in 2023, due to the positive difference between nominal GDP growth and the cost of debt service, and then at 106.5% in 2024-2025. that it will stabilize.