The European Commission maintains Spain’s growth forecast both for this year, at 1.7%, and for next year, at 2%. Meanwhile, the eurozone economy begins with a smaller-than-expected acceleration and downward revisions, although inflation declines faster than expected.
Spain maintains the growth rate, the highest of the large euro economies, but it does not improve compared to the autumn calculations due to a “combination of factors”, the Community Executive explains in its analysis. On the one hand, the strength of the tourism sector has been relaxing and the economic problems derived from Spain’s main trading partners have reduced “the dynamism of exports.” At the domestic level, high interest rates have taken their toll on the population, which also affects them. However, consumption and investment are the two engines that will keep Spanish growth afloat this year.
Regarding employment, after the “strength” shown in 2023, growth in the labor market is expected to slow, although it will continue to “contribute to maintaining economic sustainability.” Likewise, investment will be an important factor in the implementation of the recovery plan. Again, next year Brussels believes that the Spanish economy will grow by 2% again, with an increase in investment and greater external demand.
For its part, inflation, as already observed in the latest trends, was reduced by 3.4% in 2023, mainly due to a reduction in energy prices, as well as underlying inflation (which does not takes into account neither fresh food nor fuel) with 3.2%. However, the Executive admits that as the energy measures applied due to the price crisis seen in 2022 are eliminated, this will exert “upward pressure” on inflation, although it is expected that by 2025 it will already be of 2.1%.
The scenario in the eurozone and in the Twenty-seven as a whole is a little different. After escaping a technical recession almost in extremis at the end of last year, the European economy “remains weak”, according to the Community Executive. Still, he expects it to begin “gradually accelerating” as the year progresses, especially toward the second half of 2024.
Brussels forecasts growth of 0.8% in the eurozone (compared to the 1.2% forecast in autumn); and 0.9% in the EU as a whole, six tenths less than what was calculated three months ago. One of lime and the other of sand, because inflation does reduce at a greater speed than projected in the fall. In the eurozone it will fall to 2.7% (two percentage points less than in 2023) and 2.2% in 2025, approaching the 2% objective set by the European Central Bank. In the EU it will be 3% in 2024 and 2.5% in 2025.
However, Brussels warns that although the elimination of the measures due to high energy prices that were applied two years ago will be noticeable, it will also impact tensions in the Red Sea, but inflation will also be able to be gradually reduced. For now, trade disruptions will have a “marginal impact,” although it also warns that there is “uncertainty” and that greater disruptions can cause bottlenecks that would affect a price increase.
“The European economy is starting off weaker than expected, although gradual growth is expected between this year and next (…) European funds, including the recovery plan, will continue to play an essential role in investment. However, the global outlook is very uncertain, and we will closely analyze geopolitical tensions, which could negatively affect growth and inflation,” admitted economic vice president Valdis Dombrovskis.
After a dismal scenario in 2023, the large euro economies will grow again, although timidly. Germany will maintain weak growth of 0.3% this year, improving to 1.3% in 2025; while France will close with 0.9% and Italy with 0.7%.
