The strength of the Spanish economy was put to the test at the end of April when the economic data was accumulated, with a first quarter in which economic growth accelerated, inflation and employment picked up 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 Central Government sent to Brussels yesterday, just in time, as it only had time until Sunday.
The program includes an optimistic forecast. On the one hand, that unemployment will drop 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 performance of employment, the full use of European funds and the effect of the reforms underway, the Government is confident of achieving these objectives.
In terms of employment, the Executive calculates that the unemployment rate will fall to 12.2% this year and that it will continue to decline gradually until it reaches 9.8% in 2026. In addition, the Spanish Government considers that employment will be accompanied by an increase in the active population and an improvement in its quality. It is in this way that the promised figure is expected to be reached: 1.1 million more employed until 2026.
Precisely, the plan considers that the employment factor will sustain activity in the short term while the ongoing reforms, 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 known yesterday for the first quarter.
It is a growth that will increase to 2.4% in 2024, then to 1.8% in 2025 and 1.7% in 2026. It is what the Government describes as “a path of robust growth †in the period 2023 and 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 compensate for the predictable negative impact of the more restrictive monetary policy.
The macroeconomic picture predicts that domestic demand will be the main driver of growth this year, and especially private consumption. A consumption that has been falling for two consecutive quarters, but which the Executive believes 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%, also thanks to the savings accumulated in households during the pandemic.
With the changes introduced, the path to 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 fall to 3% in 2024, to 2.7% in 2025 and to 2.5% in 2026. The anticipation in one year of the reduction of 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. As for the debt, a reduction in the ratio is expected in recent years, which will allow it to be below 110% in 2024, also a 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), but this body has also asked it to have “adequate information” on the measures applied .
In a 2023 marked by the elections, the stability program brings together the commitments made with Brussels in economic terms in the near future, although no budgets for 2024 will be approved this year, given the holding of the elections generals
The presentation of the stability program comes the same week that the European Commission has made public its proposal to reactivate the tax rules. The free bar in spending that was granted to deal with the pandemic will end, but the transition to fiscal discipline will be gradual and, importantly, apply more flexible and customized mechanisms according to the needs of the various countries . It is a proposal, however, which envisages obliging countries with a deficit of more than 3% to a minimum annual adjustment of 0.5% and, as a consequence, opening a deficit procedure for them excessive
