Brussels predicts that Spain will be the large EU economy that grows the most until 2025, but it will fail to comply with fiscal rules as early as 2024
The European Commission expects that Spain will be, of the four large economies of the eurozone, the one that grows the fastest until 2025. Brussels calculations predict that the Spanish economy will advance at a rate of 2.4% this year, will slow down to 1.7% next year and will regain some pace again in 2025, a year in which the GDP would rebound by 2%.
The EU forecasts place the country above the three great powers of the community bloc: Germany, France and Italy in this order. The Commission's analysts point out that none of these three countries will manage to grow above 1.5% in the next two years. In fact, in the case of Germany, a small contraction of the economy is expected this year.
The Commission believes that household consumption will be the driving force behind the economy next year. As inflation reduces – it is expected to moderate from 3.6% this year to 3.4% in 2024 – families should recover some of the purchasing power lost during the crisis. In addition, it is expected that employment will continue to be created—although at a slower rate than until now—which will also contribute to boosting consumption.. The Commission expects the unemployment rate to close at 12.1% this year and to reduce to 11.1% within two years.
European recovery funds will also play a key role, which should be able to sustain investment in a context in which financing costs will continue to be high due to the high interest rates maintained by the European Central Bank.. After 2024 with more moderate growth, the economy would accelerate slightly in 2025 thanks to the entry into the scene of loans from European funds, which will begin to be granted from that year, as planned in the calendar.
However, the outlook is by no means free of obstacles.. The Commission warns that the high interest rates set by the ECB can curb demand. Especially in light of the high levels of public and private debt that exist in Spain, although it has been reducing.
Structural deficit above 3%
The other side of the coin is public finances. Brussels believes that Spain will not be able to comply with the deficit limits, even by completely eliminating anti-crisis measures when they decline in December. The Commission draws a panorama in which Spain has settled with a structural deficit – which always remains, regardless of whether the moment of the economic cycle is good or bad – above 3% of GDP.
The Government has committed to reducing the imbalance in public accounts to 3% next year. However, the Commission's calculations indicate that, barring surprise, an additional structural adjustment will have to be undertaken to withdraw the measures.. Regarding debt, the European Commission's forecast is that it will close at 107.5% of GDP this year, but then it will stagnate at 106.5% in the medium term.
With the return of European fiscal discipline expected next year, Spain is exposed to entering the EU's excessive deficit procedure again if it does not fulfill its commitment to reduce the imbalance. A regime that may end up involving significant economic sanctions and complying with the fiscal recommendations indicated by the EU. In any case, the Commission expects that next year there will be a dozen countries that do not meet the deficit objectives. Among them, France and Italy, which will deviate above 4%.