Domestic consumption and European funds will allow the Spanish economy to maintain a growth rate of 1.6% in 2024, which will still represent a considerable decrease from the 2.4% GDP growth rate is expected to be expected in 2024. current exercise. These are the economic projections of the Bank of Spain published this Tuesday which, in the case of next year, represent a downward revision of two tenths compared to its September calculations, and which remain below the 2% that the Government maintains.
Regarding the current year, the fourth quarter would grow by around 0.3%, the same figure as the third. The PMI indices, which indicate the level of purchases in the manufacturing sector, the Business Activity Survey of the Bank of Spain and the evolution of Social Security affiliation, point in this direction, with a growth rate in October and November similar to those previous months.
It is a growth below that of the first two quarters of the year, when 0.6% and 0.4% were recorded, and a confirmation, therefore, of the announced deceleration. In any case, it represents economic activity well above that of the euro zone, which marked a drop of one tenth in the third quarter of the year.
In the coming quarters, growth will be largely based on household consumption. It will not be as strong a growth as last year, but it will continue to increase, favored by the increase in real incomes, the moderation of inflation rates and the creation of jobs.
In addition, the Next Generation funds will also help, whose deployment will gain traction in 2024 and 2025, which will reinforce investment as an engine of growth. On the other hand, the contribution of foreign demand to growth will recover, after the marked negative impact they had in the spring and summer of 2023. However, net exports will help, but not with the same intensity as they did in 2022. .
On the other hand, the Bank of Spain warns that growth is produced by an increase in population, not by significant improvements in productivity. "You cannot fall into complacency," says Ángel Gavilán, general director of Economy and Statistics, who highlights that this low productivity is one of the main burdens on the Spanish economy.
A criticism that is based on the comparison of GDP per capita and productivity per hour registered in Spain with that of the euro zone.
Regarding inflation, the Bank of Spain revises its previous forecasts slightly downwards, setting 3.4% this year, which would remain at 3.3% in the next, having to wait until 2025 to reach the desired 2%. , the most sought after figure by the European Central Bank. Inflation is expected to have a slight rebound in early 2024, and to resume a downward path in the second half of the year. A dynamic determined largely by the evolution of energy prices and also by the expiration at the end of 2023 of a large part of the anti-inflation shield measures.
Food prices will continue their downward trend, although they are still at very high rates. The main reason for the decrease is the decrease in prices of food raw materials, and inputs such as energy and fertilizers, in addition to the announced extension of the VAT reduction on food until June 2024.
The main risks for these projections come from a possible escalation of the war conflicts in Gaza and Ukraine, due to the greater geopolitical uncertainty that this would entail and also due to its impact on energy prices. Another risk is the effects of the tightening of monetary policy on activity and prices, and at a specifically Spanish level, doubts about the withdrawal of anti-inflation measures that expire this month. If more measures are extended, it can help moderate inflation and encourage activity, but paying a price in controlling the deficit and having to assume a cost in inflation and growth when they finally expire.
