Brussels once again improves growth expectations for the Spanish economy. The European Commission predicts that GDP will increase by 2.2% in 2023, which is three tenths more than what it estimated in the month of May, when it already revised its forecasts upwards. Spain leads the improvement in the economic situation of the 27 as a whole and its growth will be more than double that of the EU, which will remain at 0.8%, which represents a decrease of two tenths compared to what was forecast by the community executive four months ago. Spain’s growth will be higher than that of France (1%) and Italy (0.9%) while Germany’s GDP will contract by 0.4%.

The improved outlook in Spain responds largely to the carryover effect of 2022, when there was a sustained increase of 5.5%, and to the good economic performance of the first half of this year, which will moderate in the remainder of the year due to fading momentum in the tourism sector, weaker activity from trading partners, the consequences of tightening financing conditions and a weaker position in the labor market, the European Commission explains in its quarterly report, which in this This time it specifically analyzes only the six large economies (Germany, France, Italy, Spain, Holland and Poland).

The improvement in Spain’s economic forecasts is explained by the “sustained relaxation of pressure on prices” added to the “increase in nominal wages” which, in the opinion of the European Commission, “partially mitigates the obstacles to private consumption.” He also trusts that the “resilience of the banking sector” will allow financial risks to be warded off and that the Recovery and Resilience Plan drawn up from European funds will continue to support investment growth.

Forecast reduction for 2024

However, the European Commission lowers its expectations regarding the year 2024 when it expects Spain to grow by 1.9% (it is one tenth less than what it predicted in the spring report). Even so, Spanish GDP growth will continue to be higher than that of the EU, which will remain at 1.4%, three tenths of a percentage point compared to estimates made four months ago.

And given the upward revision of Spain’s growth in 2023, the European Commission estimates that the EU as a whole will grow less than expected (0.8% this year and 1.4% next year). The main reason argued by community technicians is the tightening of monetary policy carried out by the ECB, which has been raising interest rates for months. This has an effect on the “weakness of domestic demand”, despite the fall in energy prices and the good situation of the labor market, which has a record of employability on the continent. The global economic situation does not lead the European Commission to predict that external demand will increase either.

Slowdown in the EU due to the fall of Germany

“Overall, the weak growth momentum in the EU is expected to extend until 2024, and the impact of restrictive monetary policy will continue to restrict economic activity,” summarizes the European Commission, which sees, however, a rebound next year. as inflation continues to decline and the labor market remains strong.

By country, the one that is most worrying among the 27 is Germany, which has experienced a slowdown. In fact, Brussels’ economic forecasts estimate a drop in GDP of four tenths this year, although growth in 2024 (1.1%) will once again be stronger than in the EU as a whole.

“The EU economy has suffered two shocks massive with the pandemic and Russia’s unprovoked war in Ukraine. The high inflation rate has taken its toll, although it is now receding. After a period of weakness, growth is expected to recover slightly next year, supported by a strong labor market, record unemployment and easing price pressures,” says European Commission Vice-President for Economic Affairs Valdis Dombrovskis. .

Regarding inflation, the European Commission expects that the downward path that has occurred in recent months will continue until the increase in prices is half that of the record it set in October of last year. The estimate is that it will be 6.5% in the EU as a whole (5.6% in the euro zone) at the end of this year and that it will be reduced to 3.2% (2.9% in the twenty countries of the eurozone) in 2024.

Spain, which already has the lowest rates compared to the rest of the European partners, will maintain that trend by ending the year with 3.6%, but the gap will close in 2024 and Brussels estimates that the rate will then be 2. 9%, slightly higher than that of France (2.7%) and Germany (2.8%), but on average for the euro zone, due to the lifting of the measures implemented by the Government, as explained by the Commission European.


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