Spain’s economy shows mixed signals this year, with growth reaching 2.4 percent, an improvement of three tenths versus September forecasts. Yet next year’s outlook cools to 1.6 percent, trimmed by a tenth. The Spanish Chamber of Commerce, led by José Luis Bonet, reflects a broader pattern across services and organizations: momentum in the current year, followed by a modest slowdown ahead.
Funcas lowers the projection to 1.5% for 2024; this sits half a point below the government
Looking at the final quarter of the year, activity slows to 0.2 percent from the previous 0.6 percent pace. Still, the country is not stalling. Spain is expected to outperform many peers in the euro area and the European Union overall. The 2023 trajectory hinges largely on public sector initiatives and programs funded by the NextGenerationEU framework, with room for maneuver depending on policy choices.
Consumption and investment
Private consumption and investment are set to decelerate due to higher inflation and rising interest rates. While growth remains positive, it will be notably more modest than last year. Spain’s external demand will reflect slower momentum in its main markets, particularly within the European Union, which accounts for about 64 percent of exports, contributing only around six-tenths of a percentage point to exports in 2023. The economy posted a 2.9 point gain in 2022.
The impact of elevated borrowing costs on 2024
The growth of the foreign sector, a key driver so far, is expected to be even more restrained in 2024, contributing roughly a tenth of a percentage point at best. Domestic demand will be the primary force behind overall activity, with private consumption and business investment likely to stay near current levels if inflation moderates and monetary policy stabilizes.
Any improvement in the inflation trajectory, together with a stable interest rate outlook, could support household spending and corporate investment, helping to maintain similar levels to this year. A cautious approach to public spending, aligned with European fiscal rules, will aim to keep deficits in check while supporting essential investments.
Inflation is expected to ease gradually, with an estimated 3.7 percent increase in 2023 and 2.7 percent in 2024. Excluding volatile food and energy, core inflation remains a concern, projected at 6.3 percent in 2023 and around 3.3 percent in 2024. On the labor market, 2023 closes with an average unemployment rate near 12.4 percent, a level that may persist into 2024 as growth slows, though employment could still expand by more than half a million full-time roles.