The Government expects growth in 2024 to create 700,000 jobs and salaries to rise by 4%

Spain will have to pull itself together to be able to grow next year. The slowdown in the eurozone economy caused by the war in Ukraine and high interest rates will leave the country's internal demand as the only engine of growth in 2024. This is how the Government sees it and this is how it has been reflected in the Budget Plan sent to Brussels on Sunday, but which was disclosed on Monday. But for the Executive's plans to work, employment would have to continue growing very strongly next year as well, as would salaries, something that seems difficult in the midst of a global slowdown.. Specifically, the Government is confident that between 2023 and 2024 more than 700,000 full-time jobs will be created and that salaries will rise by 3.7%.

Those 700,000 jobs that the Executive promises for this biennium are the same ones that were created in 2022, a year in which the Spanish economy added 690,500 full-time equivalent jobs (the employment metric used to calculate GDP).. It is important to highlight that 2022 was a year of strong growth in which the national economy advanced 5.8%, almost three times more than what the Executive expects for the indicated period.

Labor market indicators so far this year suggest that the Government's objective could be viable. Between the second quarter of 2023 and its equivalent in 2022, around half a million jobs have been created, so 200,000 more jobs in 2023 would be enough. If the rate of growth from employment to job creation observed between 2014 and 2019 – the last expansionary period of the Spanish economy before the pandemic – were met, it would be enough. The question is whether an economy in the midst of a slowdown will be able to reach these figures.

The Government justifies the viability of its forecasts in that the structural reforms that have been applied during the previous legislature “have improved the performance of the Spanish labor market”, which serves as an incentive “to increase the size of the national and foreign workforce.”. An argument similar to that used to support the pension reform.

The salary growth forecast for 2024 moves more in line with what the latest indicators indicate. The Executive expects that salaries – always measured in terms of GDP – will improve by 3.7% in 2024. A forecast that, if fulfilled, would allow employees to recover some of their lost purchasing power, especially starting in the second half of the year when inflation is expected to be lower.

The statistics on collective labor agreements reflect that the agreements signed in 2023 already include a salary increase until September of 4.3% on average. Along the same lines, the national accounting itself indicates that the remuneration of employees grew by 5.4% in the second quarter of 2023 compared to the same period last year.. In addition, the salary agreement between employers and unions to negotiate the agreements foresees an increase of 3% for 2024, although this reference is indicative.

Economic growth will be within the borders

Everything suggests that, with the eurozone economy frozen, economic growth in 2024 will be settled within Spanish borders.. The Executive expects GDP to grow by 2% in 2024, an increase that would be due exclusively to national demand. That is, the consumption and investment of Spanish households and companies would be the only support for the economy next year.. Exports, which last year contributed half of the growth, would be left out of the equation and would even subtract from GDP.

The Budget Plan foresees that consumption and investment will accelerate thanks to the dynamism of the labor market, the role of the recovery and resilience plan and the financial solvency of companies and households. Specifically, private consumption would advance 2.5% next year, compared to the 1.5% expected this year. While investment, measured as gross fixed capital formation, would accelerate from 3% in 2023 to 4% in 2024.

However, the Airef does not see it so clearly. The independent fiscal authority believes that this acceleration of private consumption next year “may be optimistic in a context of declining consumer confidence and tightening household financing conditions.”

This has been made known to the Government after endorsing its macroeconomic scenario. The fiscal watchdog is also skeptical about the investment figures. In this section, it warns of the adverse impact that increasingly tough financing conditions may have on business investment and the residential housing market.