The focus remains on Spain’s economy for the coming year as projected by leading international bodies. The Organisation for Economic Co-operation and Development, known as OECD, cut its growth forecast for Spain and now projects a GDP expansion of 1.4 percent in 2024, down from the 1.9 percent forecast in September. In their quarterly assessment released this week from Paris, the OECD also confirms that Spain’s GDP will rise by 2.4 percent this year, matching the September projection. Yet the pace will slow in 2024, easing by one percentage point, with a recovery to around 2 percent anticipated in 2025.
The smaller growth outlook for Spain in 2024 aligns with forecasts from other national and international institutions. The Spanish Chamber of Commerce recently lowered its 2024 GDP growth expectation to 1.6 percent, while the European Commission has been predicting a 1.7 percent increase as of October. The Spanish government, however, remains comparatively more optimistic and targets a 2 percent expansion.
Above the euro area average
Spain still stands as the largest economy in Western Europe and shows stronger resilience to the current slowdown that has affected the old continent. Data indicate that Spain’s economy is growing at a pace above the euro area average, which sits at about 0.6 percent this year, with the same trajectory expected for 2024.
Meanwhile, Germany’s economy is expected to contract slightly this year before a modest rise of around 0.6 percent next year. France also faces muted growth in both 2023 and 2024, hovering around 0.8 to 0.9 percent. Italy and the Netherlands display similarly modest gains, while Ireland, Greece, Croatia, and the Baltic states are forecast to perform better than Spain on certain measures.
In the wake of the inflation spike and the energy and supply challenges amplified by the war in Ukraine, the European Union’s economic engine has slowed. The effects of monetary policy from the European Central Bank and higher interest rates to fight inflation are felt across sectors such as construction and finance, shaping investment and demand patterns across the bloc.
Europe’s growth lags behind
OECD highlights that inflation will cool more slowly than desired on a global scale, which limits the room for rapid interest rate cuts in 2024. The OECD report notes that price rises among G20 economies are expected to ease from 6.2 percent in 2023 to 5.8 percent in 2024. It adds that rising borrowing costs and tighter credit standards could curb spending and push unemployment higher, potentially more sharply than hoped.
In the United States, inflation risks are seen as more persistent, while Europe faces a more pronounced slowdown and a broader lag in growth compared with other major economies. The US economy is projected to expand around 2.3 percent this year, a resilience visible in relative strength. China is anticipated to grow at roughly 5.2 percent in 2023 and about 4.7 percent in 2024.
Adding to the slowdown, OECD chief economist Clare Lombardelli points out that rising public deficits stem from the higher cost of debt driven by elevated interest rates. This pressure translates into greater spending on pensions due to aging demographics, along with increased military outlays and investments to address climate challenges. The organization’s projections show a public deficit for Spain at about 3.2 percent in 2024 and around 3.1 percent in 2025, with some figures slightly higher than those established by the more controversial European rules.