Spain’s economy is expected to slow in 2024, pressured by higher inflation, rising interest rates set by the European Central Bank, and a general eurozone slowdown. The year opens amid geopolitical tension, including the war in Ukraine and ongoing Middle East conflicts, which keep markets uncertain.
To understand current events and anticipate what 2024 may hold for Spain and the wider world, a candid event titled Perspectives 2024: Economic challenges was hosted in Madrid, sponsored by CaixaBank and organized by El Periódico de España and El Periódico. Expert voices weighed the outlook for the new year.
Judit Montoriol, chief economist at CaixaBank Research, presented a new CaixaBank analysis. The expert suggested that 2024 would be characterized by digesting a string of complex conditions built over several years, setting the frame for what follows.
She noted that the energy market rebounded quickly in 2022, and that dynamic has produced consequences. The 2023 outlook proved more negative, but as the year progressed, tensions eased, delivering a more promising year than anticipated.
Judit Arnal, senior researcher at the Center for European Policy Studies (CEPS) and the Elcano Royal Institute, stressed that the economy is in a slow-growth phase. CaixaBank Research and CEPS agree that Spain’s growth this year is around 2.4 percent, with about 1.5 percent projected for 2025. Arnal added that Spain resisted the euro area better in 2023, thanks to a service-oriented economy and reduced exposure to Chinese and Russian markets.
Luciana Taft, an economy and markets consultant with the Financial Analysts International (AFI), described the market as moderate. She remarked that a soft landing was not something many expected, acknowledging risks on the horizon but noting a comfortable stance overall.
Juan Pablo Riesgo, EY Insights’ responsible partner, highlighted opportunities from European Next Generation funds intended to drive reforms and investments. He indicated substantial room to improve how funds are absorbed to aid investment and growth.
María Jesús Fernández, senior economist at Funcas, offered a cautious but positive long-term view. She referenced conditions that support a positive trajectory, while highlighting a worrisome undercurrent: productivity gaps and a GDP per capita divergence with the European Union that could widen if not addressed through policy and innovation.
CaixaBank Research identifies consumption as a key growth pillar for 2025. Montoriol explained that a rising consumption trend would be supported by demographic growth, related changes in labor markets, and household savings dynamics that exceeded expectations.
In this context, Arnal observed that growth will hinge primarily on domestic demand, with external demand playing a more modest role, while private consumption gains support from growing domestic activity.
Inflation and interest rates
Luciana Taft affirmed that the battle against inflation is far from finished. She argued that market-implied expectations for inflation over the medium term remain above 2 percent, signaling ongoing vigilance needed by policymakers.
María Jesús Fernández added that inflation will be influenced by the unwinding of anti-inflation measures. The pace of cuts to VAT or energy-related taxes could shape the rate of inflation decline, a view Juan Pablo Riesgo endorsed as the trend toward cooling inflation becomes clearer.
Montoriol emphasized that the inflation-reduction path has started and will continue through 2024. She projected that the first interest-rate cut could occur as early as September or perhaps even sooner if inflation data stay favorable, with the potential for a pre-summer move if conditions permit.
There is ongoing discussion about whether rates have peaked; the question now is how long they will remain elevated as inflation moves toward the European central objective of about 2 percent in the medium term.
Savings and employment
María Jesús Fernández asked how employment has managed to stay so resilient and argued that this is a global trend supporting household incomes and reducing delays in family plans.
Funcas highlighted that, despite aggressive rate hikes in the euro area, households managed to sustain consumption and even increase savings, pointing to job creation as a bright spot in the recent economic development of Spain.
Taft stressed that household savings remain a critical challenge, noting Spain’s limited financial education and lack of impulse saving during stable periods. She argued that pandemic-era savings had to cover urgent needs, leaving less cushion for ordinary times.
Montoriol described job creation as robust in Spain, with preliminary data suggesting a continued positive path into 2025. She cautioned that the labor market’s strength is tempered by broader structural issues, including the need for skilled labor and stronger vocational education systems to sustain momentum.
Arnal emphasized the importance of the ICT sector in driving employment growth, highlighting high-value roles in technology and science. Riesgo added that businesses must restructure production systems and invest in a skilled workforce to preserve productivity gains, especially as debt levels in Spain remain relatively modest compared with other European economies.
Riesgo noted that demand is driving investment in energy and digital transformations, with companies signaling intent to pursue these reforms even amid a challenging environment. He underscored the need for sustained investment to support growth and productivity improvements.
Montoriol pointed out that Spain remains comparatively debt-free, a factor that has helped cushion families and firms from the worst effects of higher rates. Fernández echoed that debt for Spanish companies is lower than in many European peers, which could lessen the impact of rate increases and support a gradual consolidation of public finances.
Riesgo argued that strong investment demand, especially in energy and digital projects, is essential to maintain growth and competitiveness as the economy evolves. He emphasized that companies are ready to invest, provided policy and funding environments align to unlock faster absorption of capital.
‘Next Generation’ help
Analysts discussed the European Union’s recovery fund, noting that the program still faces implementation challenges and a slower-than-desired pace. Taft mentioned substantial investments already committed through European funds, but acknowledged the absorption period remains lengthy for many projects.
Riesgo explained that companies rely on internal resources to bridge gaps between political decisions to promote investment and the actual realization of savings. In a fragile economy, advancing investments is critical to maintain momentum, despite potential risks and hurdles. He urged that funds should reach the Spanish economy and its firms to fuel the transformation and secure a productive future, even as implementation may be slow.
Riesgo also stressed that strengthening the link between expected outcomes from Next Generation funds and real-time progress is essential, as delays in delivery can hamper transformative investments. Fernández viewed European funds as a stimulus, while public finances slowly move toward consolidation.
Funcas’ representative shared concerns about stagnating capital goods investment, calling for fiscal consolidation to support sustained growth in Spain. Taft noted that while European funds are being deployed, the process has been slow and costly to absorb, not only in Spain but across other countries as well.
Taft closed by saying that European funds are still progressing but in a cautious, incremental manner, and with substantial costs tied to absorption. The focus remains on using these funds to push Spain’s economy toward higher productivity and stronger global standing.
Tourism and real estate
In the final segment, Montoriol highlighted tourism as a crucial engine of the Spanish economy. He noted that the outlook for 2024 still calls for growth in tourism, but at more moderate rates, adding that the industry should pursue quality and sustainability to maximize long-term impact.
Montoriol also pointed to the real estate market as holding up despite higher rates. The data suggests housing prices will continue to rise, with a gradual improvement in the public deficit as growth remains steady and inflation moderates.