The strength of the Spanish economy has been put to the test at the end of April in which economic data has accumulated, with a first quarter in which economic growth has accelerated, inflation has picked up and employment has endured , despite the increase in unemployment due to the massive incorporation of new people into the labor market. A process that has culminated in the stability program that the Government sent to Brussels yesterday, just in time, since it only had a margin until Sunday.
A program that includes an optimistic forecast. On the one hand, that unemployment will fall below 10% in 2026 and that 1.1 million jobs will be created in these four years. And on the other hand, a growth of 2.1% this year and 2.4% in 2024. With the good behavior of employment, the full use of European funds and the effect of the reforms underway, the Government hopes to achieve these objectives.
In terms of employment, the Government calculates that the unemployment rate will drop this year to 12.2% and that it will continue to fall gradually until reaching 9.8% in 2026. A job that the Government considers will be accompanied by an increase in the active population and an improvement in its quality. It is in this way that it is expected to reach the promised figure: 1.1 million more employed until 2026.
Precisely, the plan considers that the labor factor will sustain activity in the short term while the reforms underway, also committed to Brussels, will allow GDP growth in the medium and long term.
In the review of the macroeconomic picture, the Government maintains its growth forecast of 2.1% this year, despite the tightening of monetary conditions. It is an estimate that is above the forecasts of the Bank of Spain, which places it at around 1.6%, and which can be based on the good GDP growth data released yesterday for the first quarter.
It is a growth that will increase to 2.4% in 2024, to later stand at 1.8% in 2025 and 1.7% in 2026. It is what the Government describes as “a robust growth path †in the period 2023-2026, driven by employment and private consumption. The recovery plan will also play a role, which is what will allow the acceleration in 2024, and which should offset the foreseeable negative impact of the more restricted monetary policy.
The macroeconomic picture foresees that domestic demand will be the main driver of growth this year, and especially private consumption. That consumption that has been falling for two consecutive quarters, but that the Executive considers that it will recover thanks to employment and the deployment of measures and reforms, in addition to the moderation of inflation. The calculation is that in 2024 it will increase to 3%, which will also be helped by savings accumulated in households during the pandemic.
With the modifications introduced, the path of deficit and debt reduction is accelerated. In the case of the deficit, it was already announced on Thursday that the forecast is for it to drop to 3% in 2024, 2.7% in 2025 and 2.5% in 2026. The one-year anticipation of the reduction The deficit to 3% is feasible, according to the Government, due to the growth of economic activity, the increase in tax collection and the good performance of employment. With regard to debt, a reduction in the ratio is expected in recent years, which will allow it to fall below 110% in 2024, also one year ahead of schedule.
The economic scenario on which the program is based is described by the Government as “prudent” and has been endorsed by the Tax Authority (Airef), although this body has also asked it to have “adequate information” on the measures applied.
In 2023 marked by elections, the stability program brings together the commitments assumed with Brussels in economic terms in the near future, although this year no budgets will be approved for 2024, due to the holding of the general elections.
The presentation of the stability program comes in the same week that the European Commission has made public its proposal to reactivate fiscal rules. The free bar in spending that was granted to deal with the pandemic will end, but the transition towards fiscal discipline will be gradual and, importantly, it will apply more flexible and personalized mechanisms to the needs of different countries. It is a proposal, however, that foresees forcing a minimum annual adjustment of 0.5% to countries with a deficit of more than 3% and for which, as a consequence, an excessive deficit procedure will be opened.
