Europe began 2024 with weaker momentum and a slower growth trajectory that is expected to persist this year. The European Commission has accordingly trimmed its outlook for the EU and the euro area, while the assessment of Spain’s economy remains unchanged. Spain is projected to grow its GDP by 1.7% in 2024, according to the Commission’s winter 2024 provisional forecasts. The new calculations also confirm Spain’s 2023 growth at 2.5%, slightly above the prior three-month estimate thanks to a stronger late-year rebound in the last quarter of 2022.
Private consumption and, to a lesser extent, investment were the main drivers of GDP growth in 2023, while external demand weighed on growth in the second and third quarters but recovered in the fourth quarter, the Commission notes. It puts quarterly growth at 0.6% from October to December, signaling a stronger start to the year that should keep Spain on a path of “moderate” but notably faster expansion than its neighbors, at 1.7% overall.
In contrast to other bodies like Funcas or the International Monetary Fund, which lowered Spain’s 2024 outlook to about 1.5%, the European Commission maintains its unchanged forecast for several reasons. The tourism sector remains a drag, the performance of Spain’s main trading partners stays subdued, and the impact of higher interest rates has a delayed effect on domestic demand.
Nevertheless, consumption and investment are expected to continue supporting growth in the near term. The Commission notes that real household income gains and the substantial still‑elevated savings buffer are likely to bolster consumer spending. As a result, Spain is projected to remain the fastest-growing major economy in Europe, outpacing Germany (0.3%), the Netherlands (0.4%), Italy (0.7%), and France (0.9%).
This evolution, driven by eroding purchasing power, a sharp monetary tightening, partial withdrawal of fiscal support, and softer external demand, led Brussels to downgrade its forecasts. The new tables show Europe growing 0.5% in 2023 (versus 0.6% estimated in November), with the EU at 0.9% this year (down from 1.3%) and a 0.8% rise in 2025 (up from 1.2%).
“After narrowly avoiding a technical recession in the second half of last year, the EU’s outlook for early 2024 remains weak,” the Commission confirms. It expects gradual acceleration through the year as inflation falls, trade improves, wages grow, and European labor markets gain resilience. But geopolitical tensions or a broader Middle East conflict could dampen this path. At present, higher transportation costs from Red Sea disruptions should have only a marginal impact on inflation. Yet, new disruptions could create bottlenecks in supply that threaten production and push prices higher,” the Commission warns.
Labor market in a slowdown
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Turning to Spain’s job market, after a dynamic year, community experts expect a slowdown while it continues to support overall activity. The recovery and resilience plan will also help, aided by solid corporate finances and financing conditions that are becoming more flexible. Taken together, these factors should push growth higher again in 2025 to about 2%.
On inflation, the Commission’s projections show a decline to 3.4% in 2023 mainly due to cheaper energy, with a further gradual decrease to around 3.2% in 2024, slightly below autumn expectations as most energy relief measures wind down. Yet the Brussels diagnosis notes that inflation would continue falling toward about 2.1% in 2021, acknowledging policy effects and evolving energy costs.