Neither inflation nor the rise in rates will slow down the Spanish economy, according to the forecasts that the Government has sent to the European Commission this Friday in its stability plan. The Executive is confident that GDP will grow this year by 2.1% (after having closed the past at 5.5%), but that in 2024 it will rebound to 2.4%, above the estimates of the rest of the economic organisms.
The new macroeconomic framework foresees that domestic demand will be the main engine of growth this year, and especially private consumption, with an estimated growth forecast of 2.1%, sustained mainly by the evolution of employment.
These are “prudent” forecasts, according to the Ministry of Economic Affairs in a note sent to the media, after the “strong economic growth” of recent years and which continues in the first quarter – when the economy has advanced by 0.5% according to the data advanced this Friday by the INE-. However, the economic analysis organizations are not so optimistic in their forecasts. The Bank of Spain is the closest to the Government’s calculations, with a forecast of 2.3% for 2024, but the International Monetary Fund (IMF) does not rise above 1.5% and the OECD calculates 1.7% .
Even so, the Government recognizes in the text sent to Brussels that this macroeconomic scenario is framed in an international context marked by the rapid tightening of monetary policies, episodes of financial tension and uncertainty in the geopolitical and energy spheres. In this sense, the Executive ensures that Spain has maintained “solid” economic growth since the end of the pandemic and that in 2023 it will lead GDP growth among the main countries of the euro area for the third consecutive year.
On the high inflation -which in April marked 4.1%- they anticipate that the measures adopted -reduction of VAT and taxes on electricity and gas, among others- will facilitate “the gradual return of the CPI to its average level term”, they indicate from Economy.
An unemployment rate of 10% in three years
The Executive’s optimism with the forecasts for the coming years also extends to the labor market. In the document sent to Brussels, Spain is confident that it will be able to recover the unemployment rate of 10% within three years, in 2026. This is a reference that the economy has not seen for 15 years, when it was in the middle of the real estate bubble in 2008. Only once in history has Spain had a lower unemployment rate, in 2007, with 7.9%. At that time, there were 20.7 million employed and just over two million unemployed, with which it was considered that the desired ‘full employment’ existed.
This new labor calculation by Moncloa is based on the expected incorporation of 1.1 million more employed persons until 2026, with an average of some 400,000 more each year. Economy reminds the EU that this figure adds “to the million jobs created after the pandemic” and that, according to the forecasts of the Ministry led by Nadia Calviño, “it will allow record levels of employment to be reached.” And he insists that Spain will achieve it with an “increase in the active population and an improvement in the quality of employment.”
These new forecasts come with recently published data from the EPA (Active Population Survey) for the first quarter, which shows a slight drop in employment that is unusual for this period, which is usually historically damaging to the economy. At the end of March, the unemployment rate stood at 13.2%, although the goal is to close this year at 12.2%. To compare with other calculations, the Bank of Spain raises it to 12.7% and expected to reach 12% in 2025.
The readjustment of the prospects of the Spanish economy for a “structural change” on which the Government insists on pointing out throughout the document. Also in the field of temporality, one of the labor Achilles heels that afflict Spain. The forecast is for the rate of eventual contracts to fall to 9%. In this way, the commitment goes through “convergence at a European level”. Until the first quarter of this year, the temporary employment rate was above 17%, although it had already begun the reduction path from more than 30% that Spain had at the end of 2021. Just at that moment the reform began employment that, with the impulse of the figure of fixed-discontinuous, “is allowing the reduction of temporary employment” in employment, according to the document.
#Government #trusts #economy #rebound #year