Funcas raises its growth forecast for this year by half a point, to 3%, and by another three-tenths for 2025, where it expects GDP to rebound by 2.1%. The entity’s experts warn, however, that the progress of the economy continues to rely excessively on public consumptionas happened in 2023, which will grow by 3%. The report names domestic demand and exports of goods and services as the main drivers of growth. Private sector demand will increase to a lesser extent. Private consumption will rebound by 2.7%, two points less than the expected growth in household disposable income in real terms. Gross fixed capital formation, however, remains on a relatively weak trajectory.
Regarding the evolution in 2025, the economic director of Funcas, Raymond Torres, identifies the drop in interest rates as the main factor that will allow GDP to grow by 2.1%. Despite everything, the entity sees risks. Its director general, Carlos Ocaña, warned that it is “very important” to improve certain elements, such as business investment and private consumption. “It is necessary to stimulate investments in equipment and housing, and this requires, beyond a reasonable tax treatment, to be firm and better regulate,” Ocaña insisted.
Regarding inflation, Funcas estimates that the annual average CPI for this year will be 2.7% and the consumption deflator rate will be 3.2%. By 2025, the private consumption deflator is expected to slow to 2.4% and a CPI around 1.8% on an annual average. The economic situation and Funcas’ forecasts are consistent with a further decline in the unemployment rate, which is expected to gradually fall to 10.5% by the end of next year. “It also incorporates an additional benefit related to the entry of foreign labor,” Torres explained.
According to the Foundation’s forecasts, between the second quarter of this year (latest available data) and the end of 2025, Nearly 550,000 net jobs will be created under the terms of the EPAa figure lower than the recent period (between the end of 2021 and the second quarter of this year, more than a million net jobs were created).
Household savings evaporate
In this context, Ocaña explained that households have not only been able to consume more this year 2024, but they have also accumulated more liquidity, more savings, with a rate that is currently around 14%, “a very high level. However, Funcas estimates that this rate will increase from 13.7% in 2024 to 12% in 2025, despite the fact that the gain in purchasing power of salaries will already be much lower, because this year 2024, this revaluation of salaries is fundamentally due to specific phenomena resulting from inflation.
Funcas’ forecasts regarding the public deficit hardly change. According to the Foundation, the budget gap This year, it would amount to 3.1% of GDPcompared to the 3% estimated by the Government, and 3% in 2025, above the 2.5% planned by the Executive. Regarding public debt, Funcas estimates that it will increase from 102.3% of GDP in 2024 to 101% in 2025.
Doubts about the budget plan sent to Brussels
Raymond Torres stressed that “without the details of the adjustment measures, and with a purely trend projection, the public accounts will improve less than what is reflected in the budgetary plan”, in reference to the structural budgetary plan sent last week by the Government in Brussels. . Regardless, Funcas estimates that Spain needs an adjustment of half a point of GDP, which can come from the income or expenditure side, which amounts to around 8 billion.
According to Ocaña, Spain still has “great room for maneuver” in tax matters. “It is not a question of increasing taxes, the taxes paid in Spain are at European level,” he clarified. What the general manager of Funcas is referring to is that there is room for improvement of all tax advantages that there are some in Spain and which reach almost three points of GDP which are lost in the collection. “We have a tax system that is very generous in bonuses, deductions and differentiated treatment for different groups of taxpayers,” he warned.
In this sense, Ocaña explained that, just as the tax levels are not so far from those of France or Germany, Spain registers a much greater volume of these tax benefits than other neighboring countries .
