Brussels improves the growth forecast for Spain and raises it to 3% for this year (three tenths more than what the Government itself has predicted). The European Commission also increases the forecast for GDP expansion in 2025 and 2026, although there will be a “slowdown” to 2.3% and 2.1%, figures that are also slightly higher than the Executive’s calculations. Spain remains the largest economy in the eurozone that is growing the most, well above the average of 0.8% in 2024 and 1.3% next year.
Poland is the other large economy that will grow the most – like Spain, 3% this year – and will surpass all European countries with a boost of 3.6% and 3.1% in the coming years. Germany “continues to face headwinds,” according to community technicians, who predict a contraction of 0.1% in 2024. The next two years will experience 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 expand 0.7% this year (1% in 2024 and 1.2% in 2025).
“Economic activity maintained its momentum in the first half of 2024, underpinned by the strong evolution of consumption and the boost in tourist activity,” explains the European Commission about the upward revision of its autumn forecasts for Spain, which are based fundamentally in the growth of eight tenths of the economy during the second quarter of the year.
Risks related 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 because of that forecast. 3% is the maximum threshold allowed by the stability rules that have been recovered this year after four years suspended, first to face the pandemic crisis and then to face the consequences of the war in Ukraine.
“The risks surrounding the projections are related to the scope of nationally financed spending necessary to address the impact of the recent floods in the Valencian Community,” the community government acknowledges. However, the extraordinary expenses that the State has to face for the reconstruction of the DANA destruction will not be counted as a deficit when examining fiscal discipline.
Substantial debt reduction
What does not fit in the economic forecasts is the deficit that Spain has committed to in the coming years, despite the fact that it will in any case be below that 3%. The stability path that the Government has proposed in Brussels involves lowering it to 2.5% in 2025 and 2.1% in 2026. However, the European Commission’s forecast is that the deficit will rise to 2.6% and at 2.7%, respectively. “In 2026, the public administration deficit is expected to increase slightly, up to 2.7% of GDP, as taxes on banks and energy companies expire,” says the text from the European Commission, which makes its analysis. based on an unchanged policy, that is, assuming that there are no new budgets, as now.
Regarding debt, the European Commission also improves the estimates for Spain, in this case with a substantial reduction, although it is still well above the 60% objective. According to its calculations, it will end this year at 102.3% compared to the 105.5% it predicted in its spring forecasts published in May. By 2025, the forecast is that it will decrease to 101.3% and to 101.1% in 2026.
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