Spain Economic Outlook. March 2024

GDP growth in Spain for 2024 is revised upwards from 1.5 % to 2.1 %. In 2025, the advance would be reduced by 0.5 pp with respect to the previous scenario, to 2.0 %. The need to initiate the adjustment in public accounts and the greater weakness expected in the Eurozone economy explain the deterioration in the outlook.

Key points

• Key points:
• Growth could lose strength in the US, although less than expected in Dec-23, and will remain weak in the eurozone and China. The moderation of inflation and interest rates will allow for a recovery from the second half of the year, except in China, where structural factors will continue to be a drag. Nevertheless, the recovery in the eurozone will be weaker than expected.
• In 2024, GDP growth in Spain could be around 2.1% (1.5% in the previous scenario). Private consumption and service exports show a better performance, supported by immigration and competitiveness gains.
• Factors that will support the advance include the observed decline in energy prices, their impact on inflation and the subsequent correction in interest rates. In addition, fiscal policy is being somewhat more expansionary than expected, while the execution of NGEU funds is reaching cruising speed.
• GDP growth is expected in 2025 (2.0%), lower than the 2.5% forecast three months ago. The deterioration in the outlook is explained by the adjustment in public accounts and the expected greater weakness of the Eurozone. Added to this is the poor performance of private investment. Productivity is stagnating while labor costs are rising, which may limit employment growth. Supply constraints persist due to a lack of skilled labor or regulation. Finally, economic policy uncertainty remains high.

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