The Government has added a total of nearly 10 billion euros to Spain’s economic growth projection between 2024 and 2026. The Council of Ministers has confirmed that the new macroeconomic framework for our country raises the GDP growth forecast for 2024 by three-tenths to 2.7%, and adds another two-tenths in 2025 and 2026 to 2.4% and 2.2%, respectively.
“The new forecasts take into account the new updated series of the annual National Accounting carried out by the National Institute of Statistics (INE), which incorporates both the ordinary annual review of the years 2021, 2022 and 2023, as well as the extraordinary five-year review that affects the entire series backwards,” explains the Ministry of Economy.
This INE correction of the rates, the third in depth since 2020, has meant an additional increase in accumulated growth of 1.1 percentage points between 2019 and 2023. “In line with this review and with the information available, the Ministry of Economy has updated the macroeconomic scenario until 2026, with an improvement in the growth forecasts for the three years. The new estimates reflect the solid evolution of the Spanish economy, which is recording stronger, more balanced and more responsible growth,” continues the department led by Carlos Cuerpo.
The Minister of Economy stressed, in the press conference after the Council of Ministers on Tuesday, that “Spain will thus continue to be one of the most dynamic economies in the Eurozone, with growth higher than that of the main European countries.” In his opinion, “this is a balanced growth thanks to the dynamism of employment, the positive evolution of consumption and investment and the strength of the foreign sector, especially exports.”
Private consumption will be one of the main drivers of growth, with growth rates of around 2% throughout the entire period. This positive evolution of private consumption is supported, in particular, by the good performance of the labour market.
“The dynamic labour market will continue to create around 500,000 jobs a year and exceed 22 million people in employment next year, while the unemployment rate continues to fall, to below 10% in 2026,” stressed Cuerpo. This growth in employment is accompanied by an improvement in hourly productivity every year, and an increase in remuneration per employee, which will grow above inflation, which will allow the purchasing power of workers to continue to improve.
Investment is also revised upwards and is one of the main elements in the upward update of the economic forecasts, reflecting the positive drive and contribution of the Recovery Plan. “Likewise, the dynamism of the foreign sector will be maintained, thanks to the evolution of exports of goods and services, which will maintain their positive tone,” stressed the Minister of Economy.
Prior improvement by the Bank of Spain
Last week, the Bank of Spain also revised its projections, with an improvement of nearly 15 billion more in one go in the progress of economic activity between 2024, 2025 and 2026. For this year, the institution increased GDP growth by half a point, from 2.3% to 2.8%. This is mainly due to the better prospects for the foreign sector, especially tourism, “which is continuing to grow”. It is also due to exports of non-tourist services and the fall in imports, thanks to the effect of the transition to renewable energies in Spain.
In 2025, the Bank of Spain’s growth estimate is expected to rise by three-tenths, to 2.2%. In 2026, by two-tenths, to 1.9%. According to the institution, which agrees with the Government, in the next two years, “domestic demand” will take over from the foreign sector. Household consumption and business investment will pick up and will be the main drivers of activity, favoured by the drop in interest rates, inflation – estimated at 2.9% in 2024, 2.1% in 2025 and 1.8% in 2026 -, by the increase in confidence and by the Recovery Plan, according to the Bank of Spain’s analysis.
Along with the various inequalities (of wealth, gender, etc.), the escalation of housing prices is the major problem for our economy, and could perpetuate the weakness of household spending.
Another threat is the risk that the Government will not be able to approve the General State Budget (PGE) for 2025. This Tuesday, the Council of Ministers agreed to withdraw the budgetary stability objectives from parliamentary proceedings. According to the Government, “the objective of this decision is to give more time to the negotiation by offering a new opportunity for dialogue” with its parliamentary partners, given the risk that the path could be overturned in Parliament in the vote on Thursday, due to lack of support.
Treasury sources insist that “the Spanish Government will not accept that the PP’s irresponsibility will cause serious harm to the Autonomous Communities and local governments, which would lose almost 12 billion euros in budgetary margin if a new path is not approved.”
Meanwhile, the Bank of Spain believes that in order to comply with the fiscal rules of the European Union (EU), cuts and adjustments would have to be made that would affect the entire projections. Although, the multiannual plan that Spain has to send to the European Commission will not be known until October.
Source: www.eldiario.es
