Journalists always make mistakes when they play prophets. Therefore, it is better not to predict how the Spanish economy will do during 2024. Things are so tangled that anything can happen. Neither as good as the Government says, nor as bad as the opposition predicts. Like last year, we will go in fits and starts.
There is no doubt that things are not looking good in the European Union. Germany is going badly. The year ended with negative growth of three tenths and inflation that was too high, approaching 6%. For this year it could fall into a technical recession and weigh down the rest of its European partners, whose average growth will barely grow by 1% of its GDP.
In this scenario, with the German locomotive slowed down, the irrational optimism of the Spanish Government that does not deviate from “Spain is doing well” is striking. It is true that in 2023 things ended better than expected, thanks among other things to the tourism recovery and the European Next Generation funds.
But things may begin to change, especially after the European Parliament elections in June. Everything suggests that Brussels is not going to be as understanding of Spanish defaults on deficit and debt as it has been until now. The so-called “frugal” countries are going to tighten the screws, especially with a Germany in recession. It is unrealistic to think that those who tighten their belts will not say or do anything while the waste continues with the “open bar.” The party is over and it's over for everyone.
However, the Spanish do not seem to have realized that the economic situation has changed. According to the latest surveys, things are getting better and better. For several consecutive months, citizens claim that they are saving a little more each time. This may be influenced by the fact that pensions and salaries are gaining purchasing power for the first time since the crisis and that the labor market is improving, to the point that the Government has come to talk about full employment.
But we should not cheat in solitaire because with Europe in technical recession, tourism will not do as well as in recent months. It is also not true that the purchasing power of salaries is increasing as much as is claimed. Not even inflation is controlled.
It is true that interest rates and energy prices are not going to rise, but it is no less true that the geopolitical tensions caused by the war in Ukraine and the Red Sea will continue to increase production costs.
Therefore, neither Germany is doing so badly when a medium-term analysis is done, nor is Spain doing so well, although the short-term situation is favorable to us. The Executive would do well to be much more prudent and lower expectations regarding what is to come.
