The OECD has raised Spain’s economic growth by two tenths to 3% this year and another to 2.3% in 2025, despite the DANA blow and despite the weakness of the eurozone, whose GDP (Gross Domestic Product) will advance overall 0.8% and 1.3%, respectively, mainly due to stagnation in Germany.
The projections exercise of the international institution closes the price crisis that has been suffered since 2021. According to OECD economists, inflation in Spain will remain at 2.8% on average in 2024, and will moderate to 2.1% next year. This ‘disinflation’ will be one of the drivers of economic growth by easing the ‘pocket’ of families.
That is, salaries are going to give more of themselves, one of the reasons why “private consumption” is expected to increase by 2.7% in 2024 and 2.4% in 2025, along with the strength of the market labor and “greater household savings.” The creation of jobs will reduce unemployment from 11.5% this year to 10.9% next year, and also increases the number of people working in each home, improving the income they have each month.
Furthermore, “the investment will be recovered supported by lower financing costs [por las bajadas de los tipos de interés del BCE] and the implementation of the Recovery, Transformation and Resilience Plan,” says the OECD.
The other boost to growth is the foreign sector, and is supported by tourism, exports of other services [de consultoría, ingeniería, o relacionados con la tecnología, el gran cambio estructural de nuestra economía] and lower dependence on energy imports, as listed in the projections report of the international institution.
With these projections, the OECD approves Spain’s fiscal plan —in compliance with EU commitments— to reduce the deficit (the imbalance between public expenditure and income) to 2.5% in 2025 and 2.1% in 2026, with an ‘adjustment’ or ‘consolidation’ of the Budgets of 12 billion in the next years.
“The projections assume that the growth of public spending will be restricted, while the anti-inflation measures introduced in 2022 will end in 2024,” the report states. On the other hand, “the Government has announced an aid package for areas affected by floods [provocadas por la DANA] of around 1.1% of GDP, of which 30% are guarantees,” he recalls. “The impact on the fiscal deficit is uncertain, as it will depend on the scope of the aid requested and the timing of disbursements,” he continues.
Growth slowing to 2% in 2026
In 2026, the OECD is confident that our country’s GDP (Gross Domestic Product) will slow down and advance by 2%. In this scenario, “while the budget deficit and the public debt-to-GDP ratio have decreased, fiscal consolidation remains vital to maintain a downward trajectory in debt, adhere to the new EU fiscal rules and accommodate spending priorities.” , such as those related to the aging of the population [las pensiones]”, points out the OECD.
The institution considers that the latest tax reforms approved by Congress go in that direction, although it recommends a gradual expansion “of the VAT tax base, the increase in environmental taxes and the improvement of the efficiency of public spending would support the efforts of consolidation and would create space for spending that favors economic growth.
“The main risks are the increase in geopolitical tensions that could increase energy prices and worsen demand from Spain’s main trading partners, and a slow implementation of the EU Recovery Plan,” the report concludes.
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