Brussels has once again boosted growth expectations for the Spanish economy. The European Commission predicts that GDP will rise by 2.2% in 2023, which is three-tenths more than it estimated in May, when it revised its forecasts upwards. Spain leads the growth of the economic situation in 27 in general and its growth is more than double that of the EU, which will remain at 0.8%, which represents a decrease of two tenths compared to that predicted by community executive. four months ago. Spain’s growth was higher than France (1%) and Italy (0.9%) while Germany’s GDP fell by 0.4%.
The improved outlook is largely due to the impact of the carryover to 2022, when there will be a continuous increase of 5.5%, and to the good performance of the economy in the first half of the year, which will slow down in the rest of the year due to the slowdown in momentum in the tourism sector, the weaker activity from trading partners, the consequences of the tightening of financial conditions and a weak position in the labor market, explains the European Commission in its quarterly report, which on this occasion analyzed only six major economies (Germany, France. , Italy, Spain, Holland and Poland).
The improvement in the economic forecasts of Spain is explained by the “continuous relaxation of the pressure on prices” added to the “increase in nominal wages” which, in the opinion of the European Commission, “partially mitigates the obstacles to private consumption.” He also believes that the “stability of the banking sector” will allow financial risks to be avoided and that the Recovery and Stabilization Plan obtained from European funds will continue to support investment growth.
However, the European Commission has lowered its expectations about the year 2024 when it expects Spain to grow by 1.9% (this is a tenth less than predicted in the spring report). However, Spain’s GDP growth will continue to be higher than that of the EU, which will remain at 1.4%.
Faced with an upward revision of Spain’s growth in 2023, the European Commission estimates that the EU as a whole will grow below expectations (0.8% this year and 1.4% next year). The main reason argued by technicians in the community is the tightening of monetary policy made by the ECB, which has raised interest rates for months. This has the effect of the “weakness of domestic demand”, despite the fall in energy prices and the good conditions of the labor market, with a record of employment in the continent. The state of the world economy does not lead the European Commission to predict that external demand will also increase.
“Overall, the weak growth momentum in the EU is expected to extend until 2024, and the impact of restrictive monetary policy will continue to restrain economic activity,” summarized the European Commission, which saw , however, a rebound next year. while inflation continues to decline and the labor market remains strong.
By country, the most worried of the 27 is Germany, which is experiencing a slowdown. In fact, economic forecasts in Brussels estimate a reduction in GDP of four tenths this year, although growth in 2024 (1.1%) will once again be stronger than in the EU as a whole.
“The EU economy suffers from both shock because of the pandemic and Russia’s senseless war in Ukraine. The high inflation rate took its toll, although it is now subsiding. After a period of weakness, growth is expected to recover slightly next year, supported by a strong labor market, record unemployment and easing price pressures,” said the Vice-President of the European Commission for Economic Affairs Valdis Dombrovskis. .
Regarding inflation, the European Commission expects that the low road that has occurred in recent months will continue until the increase in prices is half of the record it set in October last year. The estimate is that it will be 6.5% in the EU as a whole (5.6% in the euro zone) at the end of this year and that it will be reduced to 3.2% (2.9% in the twenty countries of the eurozone) in 2024.
Spain, which has the lowest rates compared to other European partners, will continue that trend by ending the year with 3.6%, but the gap will close in 2024 and Brussels estimates that the rate will be 2. 9%, slightly higher than France (2.7%) and Germany (2.8%), but on average for the euro zone, due to the lifting of measures implemented by the Government, as explained by the Commission European.