Brussels improves its growth forecasts for Spain and raises them to 3% for this year (three tenths more than what the government itself had forecast). The European Commission is also increasing GDP expansion forecasts for 2025 and 2026, although a “slowdown” will be observed to 2.3% and 2.1%, figures also slightly higher than the executive’s calculations. Spain remains the euro zone’s largest and fastest-growing economy, well above the average of 0.8% in 2024 and 1.3% next year.
Poland is the other major economy that will experience the strongest growth – like Spain, 3% this year – and will surpass all European countries with an increase of 3.6% and 3.1% in the coming years. Germany “continues to face headwinds”, according to community technicians, who forecast a contraction of 0.1% in 2024. The next two years will see growth of 0.7% and 1.3%. France will end this year with growth of 1.1% (predictably 0.8% in 2025 and 1.4% the following year) and Italy will experience growth of 0.7% this year (1% in 2024 and 1.2% in 2025).
“Economic activity maintained its dynamism in the first half of 2024, supported by the strong evolution of consumption and the revival of tourist activity”, explains the European Commission regarding the upward revision of its autumn forecasts for Spain, fundamentally based on growth. eight-tenths of the economy during the second quarter of the year.
Risks linked to the impact of DANA
Regarding the Spanish public deficit, Brussels is confident that it will end the year at 3%, as predicted by the Executive and the European Commission itself, which freed Spain from an excessive deficit procedure precisely thanks to this forecast. 3% is the maximum threshold authorized by the stability rules which were recovered this year after four years of suspension, first to deal with the pandemic crisis then to deal with the consequences of the war in Ukraine.
“The risks surrounding the projections relate to the scale of nationally financed expenditure required to address the impact of recent flooding in the Valencian Community,” acknowledges the community government. However, the extraordinary expenses that the State must face for the reconstruction of the DANA destruction site will not be counted as a deficit when examining budgetary discipline.
Substantial debt reduction
What does not fit into the economic forecasts is the deficit that Spain has committed to maintaining in the years to come, even if it will be below 3% in any case. The stability path proposed by the government in Brussels involves lowering it to 2.5% in 2025 and 2.1% in 2026. However, the European Commission predicts that the deficit will increase to 2.6% and 2.0% respectively. 7%. “In 2026, the public administration deficit is expected to increase slightly, up to 2.7% of GDP, with the expiration of taxes on banks and energy companies,” indicates the text of the European Commission, which founds his analysis of an unchanged policy. that is, assuming there are no new budgets, as is currently the case.
Regarding the debt, the European Commission also improves the estimates for Spain, in this case with a substantial reduction, although it remains well above the 60% target. According to its calculations, it will end this year at 102.3% compared to 105.5% forecast in its spring forecasts published in May. By 2025, it is predicted to decrease to 101.3% and to 101.1% in 2026.
