Spain | What can go wrong?

As part of the long tradition of calling economics the “dismal” science, I would like to review some of the risk scenarios facing the Spanish economy, now that BBVA Research has raised its GDP growth forecasts for 2024 and 2025 to 2.9% and 2.4%, respectively.

Key points

• Key points:
• The most likely scenario moving forward is that both employment growth and the recovery of real wages and corporate profits will continue. This is thanks to the competitiveness improvements that have been achieved, the fall in interest rates, immigration and the expected acceleration in the eurozone economy.
• The first risk scenario, both in terms of probability of occurrence and potential impact, is what would happen were the increase in the cost of housing to pick up further, in a context of still unresolved supply side problems and a steadily rising number of households.
• The second risk scenario relates to monetary policy becoming less restrictive, thus pushing up demand and leading to higher inflation and competitiveness losses.
• On this particular point, the third risk scenario has to do with the consequences of low investment growth in recent years and the possibility that this will lead to an environment of lower activity down the line.

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