Bank of Spain to update its 2023 GDP forecast higher
Economic activity shows resilience as 2023 progresses. After a 5.5% expansion in 2022, analysts project a modest 1.4% gain for 2023, according to a panel of experts surveyed by PwC. This stance sits slightly below the Bank of Spain’s own estimates and about 0.7 percentage points below the government’s projection for the year. The PwC-led Economic and Trade Consensus report, compiled from the insights of around 450 experts, business leaders, and managers in the first quarter, signals guarded optimism for Spain’s economy. It notes that exports should perform well and that household consumption is likely to stay solid over the next six months.
You will find a similar pattern in predictions for the coming quarters. The outlook is about three-tenths more optimistic than the forecast made in late 2022, which had anticipated 1.1% growth for 2023. Those who expect a downturn have diminished, while more foresee a better performance in the near term and into 2024. Roughly half of respondents expect improvements or stability in the next quarter and in the year ahead, with about 23% still foreseeing greater difficulties. A brighter picture for 2024 points to around a 2.1% growth rate.
There is widespread enthusiasm in the business community. Only a small share, about 8%, rates the current economic-financial situation of companies as poor, while the overwhelming majority—roughly 92%—believe conditions are good or normal. This optimism is tied to exports, which are expected to rise or stay steady for around 90% of respondents over the next six months. When the question turns to competitiveness, the same majority sentiment appears. Job creation remains mixed; expectations split between ongoing or improved hiring versus a potential slowdown.
One key domestic issue is the household sector, which faces pressures from a slower growth trajectory. Although the share of people who expect the quarter ahead to deteriorate has fallen from 70% to roughly 34%, current conditions are seen as largely normal. Household consumption appears to be climbing, but housing demand is anticipated to decline by about 78% of respondents, with around 44.7% specifically anticipating softer housing activity.
The survey reflects conditions before recent moves in banking markets in the United States and Europe, so it does not factor in those developments when estimating interest rates and inflation. It anticipates interest rates to sit between 3% and 3.75% by next June, and the inflation backdrop to average about 4.1% in June and 3.8% by year-end. When it comes to pricing strategies, about 60% expect price increases, while 40% plan to keep prices steady in response to rising costs in energy and transportation.
The report includes a monograph analyzing the state and principal risks facing public finances. A majority, around 63.2%, feel that the fiscal situation has not yet improved enough since the 2008 crisis and the dramatic imbalances of the pandemic period. The majority also believe that the expenditure path of Public Administrations remains in line with initial projections, including measures from the late-2022 relief package that featured, among other items, a 200 euro family check and a cut in VAT on basic foods.
About half of respondents fear a high risk of not hitting the 2023 targets clear enough, and 69% contend that pension spending could threaten the sustainability of public pensions. On tax reform, a third regret the lack of progress during the current legislative period, arguing that increased revenues reflect nominal growth rather than a fundamental restructuring that would balance public spending in the medium term. These insights underscore a cautious but hopeful view of public finances moving forward. Cited: PwC’s Economic and Trade Consensus report from the first quarter, drawing on input from a broad group of experts and leaders.