The Bank of Spain has once again raised our country’s economic growth forecast to 3.1% this year and 2.5% in 2025. The financial regulator adds three tenths to the GDP (Gross Domestic Product) advance projection. of 2024 and another three tenths to that of the next year and indicates that inflation will moderate to the theoretical objective of around 2% on average in 2025, from the 2.9% at which it will close this year, stopping damaging the ‘pocket’ of households.
This new upward update exceeds the expectations of the rest of the institutions (including the OECD, the IMF, the European Commission and the Government) and confirms that Spain will continue to lead developed economies. A very notable performance if we take into account the weakness of our main political and commercial partners, Germany and France, and which is based on various factors.
Firstly, in the recovery, little by little, of the purchasing power of families, which will favor a greater rebound in consumption thanks to the strength and less precariousness of the labor market, the Government’s income protection policies (with the increase of the SMI as a prime example), to the fall in inflation and the lowering of interest rates by the European Central Bank (ECB).
The housing crisis – difficulties in accessing housing, both when renting and buying and selling – is one of the main threats to household spending. “An analysis of the data from the Family Financial Survey (EFF) suggests that the marginal propensity to consume would have decreased appreciably in our country between 2017 and 2022, a phenomenon that would have been more pronounced among higher-income households and in those without home ownership,” observes the Bank of Spain.
Furthermore, the best forecasts are supported by the reactivation of business investment, thanks above all to the deployment of the Recovery Plan. Also in the great change in the foreign sector, with the unprecedented increase in exports of high value-added services, beyond tourism, whose boom in recent years is reaching its peak.
Two more reasons. Activity in Spain is benefiting from lower energy costs than in the rest of the eurozone due to the greater weight of renewables, which boosts all factors and all sectors, and their competitiveness. And, finally, due to demographic growth, thanks to the “intense” arrival of immigrants.
The review of the Bank of Spain adds nearly 8,000 million more euros of economic activity [según la Contabilidad Nacional] of our country in 2024 and 2025 “despite the negative impact —predictably transitory— that the DANA that affected several Spanish provinces at the end of October would have had on economic activity in recent weeks,” according to the Bank of Spain report, published this Tuesday.
“After the high dynamism of activity recorded in the third quarter, the available indicators suggest that the pace of GDP expansion would remain robust in the last quarter of the year,” the document states. The GDP growth in the third quarter stood at 0.8% in quarter-on-quarter terms, above what was expected in the Bank of Spain’s projection exercise in September. “This growth responded, mainly, to the high vigor shown by both private consumption and public consumption, while investment once again surprised on the downside,” explains the institution.
“The most recent cyclical information is consistent with the maintenance of a high GDP growth rate also in the fourth quarter, which could be between 0.6% and 0.7% in quarter-on-quarter terms. These rates, whose estimation is surrounded by high uncertainty, already incorporate the possible negative impact of DANA on economic activity,” he adds.
“In any case, in line with the information available, it is projected that this negative impact [de una o dos décimas de PIB] “It will be eminently transitory and will be offset in the first months of 2025 by the fiscal boost from the various support measures approved for affected families and companies — as long as an agile and effective deployment of said support is carried out.” , continues the projections report.
The risks
“At the international level, the main source of risk emanates from a possible shift in economic policies by the new US Administration in the coming months. A change about which there are not enough details to make a precise assessment, but which would foreseeably have a downward impact on global, European and Spanish economic activity,” warns the Bank of Spain.
“The uncertainty arising from the war conflicts in Ukraine and the Middle East also continues to be relevant and, in addition, the risks associated with political instability and economic weakness in some European countries, such as France and Germany, would be gaining relevance,” the report continues. regulator.
At the national level, apart from the aforementioned housing crisis, “it is worth highlighting the uncertainty about the speed with which the disinflationary process will occur throughout the projection horizon and about the path of recovery of business investment, a fundamental rubric to sustain economic growth and which has been persistently surprising downwards in recent quarters,” he continues.
Likewise, there is also uncertainty regarding the future course of fiscal policy in our country. “In particular, strict compliance with the commitments acquired by the Spanish authorities in the medium-term Fiscal and Structural Plan would mean an additional budgetary adjustment to that incorporated in these projections, which would imply a downward risk for the activity over the horizon.” projection. The magnitude of this risk will depend on the design of said additional budget adjustment path, as analyzed in the projections section of this document,” the institution concludes.
#Bank #Spain #raises #growth #forecast #year
