Brussels improves its growth forecasts for Spain in 2024 to 3%, nine tenths more than what it calculated in May and even above the figures of the Minister of the Economy. Carlos’ bodywhich had calculated an expansion of 2.7%. Activity will slow quickly to 2.3% in 2025 and 2.1% in 2026. These forecasts still do not take into account the economic impact of Valencia’s DANA.
In the absence of calculation of DANA expenses (which the report points to as a budgetary risk but which in any case will not be taken into account for the procedure for sanctioning excessive deficits), Brussels estimates that Spain will achieve the objective of reducing the budgetary gap to 3% this year.
However, from 2024, the Sánchez government is deviating from its own multi-year adjustment plan sent to Brussels last October. For 2025, the Community Executive calculates a deficit of 2.6% (instead of the 2.5% promised), while in 2026 the gap will increase further to 2.7% (compared to the 2.1% promised ). An increase that the Commission attributes to end taxes on banks and energy companies.
In the balance of risks for the economy, the Community Executive underlines that “the EU is increasingly exposed to environmental risks”. “The recent floods that hit parts of southern Spain illustrate once again the dramatic consequences that climate change can have on populations, their habitats and the economy,” the report says.
“THE infrastructure damage in affected regions may have repercussions on the productive fabric beyond its borders, while disruptions in economic activity could revive inflationary pressuresparticularly on food,” warns the Commission.
According to Brussels forecasts, Spain will this year be the fourth fastest growing country in the European Union (tied with Poland), behind Malta, Croatia and Cyprus. The rate of expansion of the Spanish economy triples the EU average (0.9%) and well ahead of the anemic growth of France (1.1%) and Italy (0.7%) and the recession of Germany (-0.1%).
Growth forecast for EU countries in 2024
Despite this strong dynamism, our country will also remain absolute leader in unemployment in the European Union at least until 2026and will be the only Member State with a double-digit unemployment rate in 2025 and 2026. Concretely, the European Commission predicts that the rate will barely decrease from 11.5% on average this year, to 11% in 2025 and 10.7 % in 2025. 2026.
Concerning inflation, the Community Executive predicts that it will fall on average to 2.8% in 2024 due to the slowing down of energy and foodwhile hotel and transport prices will fall more slowly. The result is that the CPI will continue to decline, reaching 2.2% in 2025 and 2% in 2026.
The statistical review carried out this autumn reduced Spanish general government debt in 2023 by almost three percentage points, to 105.1%. Brussels expects debt to continue falling to 102.3% this year thanks to strong growth in nominal GDP, which exceeds interest costs.
However, debt reduction will be much slower in 2025-2026until it reaches around 101.1%, because the favorable gap between interest rates and growth will be smaller.
As the main downside risk for Spain, Brussels cites lower than expected growth in the main Spanish commercial markets, which could negatively affect the dynamism of activity, particularly tourism. Furthermore, the The private sector’s continued risk aversion could contribute to slowing investment.
On the contrary, a more rapid decline in the high savings rate of Spanish households, returning to its long-term average level, could provide an additional boost to consumption.
