Brussels once again improves its growth forecast for Spain. The Spanish economy will grow by 2.2% this year, compared to the 1.9% predicted by the European Commission in May, a figure that still reflects the drag effect of a better-than-expected 2022, as well as the good performance of activity. during the first half of the year. Thus, Spain is currently at the forefront of growth in the euro zone and the European Union as a whole, which is increasingly suffering from the slowdown in Germany, the impact of the energy shock and the consequences of the rise in prices on the consumption. Spain "has exceeded our spring expectations," said the European Commissioner for the Economy, Paolo Gentiloni, at a press conference.
In response to questions from the press, Gentiloni ruled out that the Spanish political situation poses a risk to the economy or could cause delays in the execution of the Recovery and Resilience Plan. "No, we are not worried," he assured. "If you look at the forecasts that we have presented, Spain has a fairly good situation, better than other countries in terms of growth or inflation prospects," highlighted the European Commissioner for the Economy, who believes that the Government of Pedro Sánchez, with which met in July, "is fully committed to avoiding any delay" in the deployment and execution of Next Generation EU funds. The uncertainty about when a Government can be formed, or whether it will be necessary to repeat the elections, does not particularly concern Brussels. "We always deal with the governments that exist, in office or with full powers. The country in which we live [Belgium] had a government in office for around a year and a half," recalled the European commissioner.
According to the new community forecasts, at a European level, although the labor market is resisting and inflation continues on its downward path, growth is losing steam even if it does not collapse and dodge the dreaded recession. Compared with the 2.2% expansion expected for Spain this year, the growth forecast for the EU this year is 08%, two tenths less than what was expected in May, a figure that would reach 1.4 % in 2024, three tenths less than what was included in the previous forecast.
"The latest data confirm that economic activity in the EU slowed down during the first half of 2023 as a result of the formidable blows it has faced," the European Commission states in a statement, which this time in its update of the economic forecasts for summer presented in May has only included its projections for the five largest economies in the EU, Spain among them, and has not reviewed its analyzes on the evolution of the deficit or unemployment. But "the latest data confirms that the EU avoided the rescission last winter despite the persistent and exceptional winds that blew against it," Gentiloni stressed.
The weakness of internal demand, particularly consumption, "indicates that the high and still rising prices of most goods and services are having a stronger impact than expected in the spring forecasts", admits the community executive , which highlights that this phenomenon is taking place despite the fact that energy prices are falling, wages have risen and the labor market remains "exceptionally strong". The new forecast for inflation in the EU for 2023, after closing 2022 at 9.2%, improves to 6.5% (two tenths less than predicted in May) and is expected to be at 3.2% in 2024, one tenth more than expected. The inflationary pressure in Spain will remain this year well below the Community average (3.6%) and the forecast is that it will remain at 2.9% in 2024, when it will be in line with the Union average .
The momentum shown in 2022 and 2023 by the Spanish economy, however, will weaken in the final stretch of this year as a result of the end of the tourist season, the difficulties faced by its large trading partners and the tightening of monetary policy. although not as much as was predicted just four months ago, explains the European Commission. Thus, while the review has been downward for the EU as a whole, the services of the Directorate of Economic Affairs of the community executive calculate that in 2024 the Spanish GDP will increase by 1.9%, compared to the 1.2% expected. in his May review.
At a global level, the growth forecast has not improved, "which implies that the European economy cannot count on strong support from external demand." The situation of the German economy, which could close the year with a contraction of 0.1% of its GDP, will improve next year, when an expansion of 1.1% is expected. Thus, in 2024, the EU as a whole could experience a slight increase in its growth, up to 1.4% after growing 0.8% this year, according to the latest forecasts from Brussels, which generally reflect a climate of cooling of the European economy.
A striking fact highlighted by Gentiloni is the "heterogeneity" of the level of growth currently recorded by the large European economies (Germany, France, Italy, the Netherlands, Spain and Poland). Germany's GDP will contract this year slightly more than expected, up to -0.4%, while in France the economy experienced a significant rebound in the second quarter of the year and expects to grow 1% in 2023, three tenths more than expected. Italy's growth in the second quarter of the year "surprised downwards" due to the fall in domestic demand and its GDP growth forecasts have been lowered to 0.9% this year, contrary to what happened in Spain, which has surprised positively and its forecasts have improved. Very sensitive to export trends, the Dutch economy has contracted for two quarters this year and is expected to grow just 0.5% this year and 1% in 2024. The Polish economy finally contracted seriously in the second quarter of the year, when its GDP fell by 2.2%, which has led to a reduction in its growth forecasts this year, although by 2024 the prediction that it will recover strongly, with a growth of 2, 7%, remains.
In the medium term, the outlook is uncertain not only due to geopolitical tensions but also due to doubts about the impact of monetary policy on the real economy. Russia's war of aggression against Ukraine, which "continues to pose risks and is a source of uncertainty" and "the tightening of monetary policy may weigh on economic activity more than expected, although it could also lead to a reduction in inflation faster than expected and accelerate the recovery of Europeans' real incomes. "Increasing climate risks", illustrated by extreme weather conditions, unprecedented fires and flooding this summer, also weigh on the forecast," concludes the European Commission.
