HEALTHPLAN MAGAZINE

The European Commission has increased its economic growth projections for Spain in 2023.

According to the Commission, Spain's GDP is now expected to grow by 2.2 percent this year, up by three-tenths compared to their previous forecast in May. However, the growth forecast for 2024 has been slightly reduced to 1.9 percent, down by one-tenth from the previous analysis. Brussels attributes the potential year-end weakness to a decline in tourism and exports.

This revision aligns with the consensus among analysts who have been steadily raising their growth expectations for Spain in 2023 in recent months, positioning it slightly above 2 percent. This follows a better-than-expected first half of the year and an upward correction in growth data for the second half of 2022 by Spain's National Statistics Institute (INE).

At a recent press conference, the European Commissioner for Economy, Paulo Gentiloni said that Spain "has exceeded our spring expectations."

Responding to questions from the press, Gentiloni dismissed claims that the Spanish political situation posed a risk to the economy or could cause delays in the implementation of the Recovery and Resilience Plan.

"No, we are not worried. 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," asserted the European Commissioner. He also said that he believes that the Spanish Government "is fully committed to avoiding any delay in the deployment and execution of Next Generation EU funds.” He also stated that Brussels isn't particularly concerned about the uncertainty surrounding the formation of a government or the potential need for election reruns.

The Commission's forecasts suggest that Spain is on track to outpace other major European economies in terms of growth this year, significantly surpassing the European Union and Eurozone average of 0.8 percent. If realised, Spain's economic growth would more than double that of France (1 percent) and Italy (0.9 percent), outperforming the Netherlands (0.5 percent), Poland (0.5 percent), and Germany, which is expected to end the year with a negative GDP growth of -0.4 percent. It's important to note that all these countries recovered their pre-pandemic GDP levels faster than Spain, which achieved this milestone in the first quarter of the current year.

Brussels has also adjusted its inflation forecasts for the six largest Eurozone economies. The Commission now expects Spain to end 2023 with a 3.6 percent price increase, four tenths lower than the projection made four months ago. This places Spain's inflation forecast notably lower than the Eurozone average (6.5 percent) and other countries like Germany (6.4 percent), Italy (5.9 percent), and France (5.6 percent), which are more vulnerable to the repercussions of the Russian invasion of Ukraine.

However, the Commission predicts that consumer prices in Spain will rise by 2.9 percent in the following year, two tenths higher than the previous analysis, and still above the European Central Bank's (ECB) 2 percent target. Brussels anticipates that the discontinuation of energy price reduction measures scheduled for the end of the year will exert upward pressure on prices, which is expected to diminish throughout 2024.

Despite positive macroeconomic indicators, the Commission cautions about the second half of the year, expecting more moderate growth. The boost from tourism is anticipated to fade, and the economic slowdown in Spain's major trading partners will become increasingly evident as a decline in exports.

Moreover, the consequences of the ECB's interest rate hikes will continue to affect households, especially through higher mortgage payments, and the labour market may lose some momentum. Recent macroeconomic data, following the summer break, led institutions like Airef to lower their GDP growth forecast for the third quarter to 0 percent.

Nevertheless, the Commission remains optimistic that Spaniards can regain some of their lost purchasing power over the past two years due to relief in inflation and the salary increases recorded this year. Additionally, the implementation of the recovery plan is expected to stimulate investment in the coming years, contributing to sustained economic growth.

Sources

https://www.20minutos.es/noticia/5171301/0/bruselas-eleva-2-2-prevision-crecimiento-espana-2023/
https://www.lavanguardia.com/economia/20230911/9218252/bruselas-mejora-prevision-crecimiento-espana-economia-mas-expande-ue.html