The Government raises its growth forecast for 2023 to 2.4% and does not rule out extending anti-war support measures

The Government has revised upwards its economic growth forecast for 2023 and now places it at 2.4%, three tenths above the reference with which it prepared the General State Budgets for 2023. This is reflected in the Budget Plan that the Executive sent to Brussels on Sunday, but whose content was published this Monday. The new forecast is more in line with what most analysts point out and reflects the “greater dynamism of the Spanish economy,” defends the Ministry of Economic Affairs in a note that accompanies the dissemination of the report.

The document, which includes the general lines of the budgets of all public administrations, does not include the extension of the energy support measures that end on December 31. Of course, the Executive makes it clear that it reserves the right to extend or introduce new measures next year if Pedro Sánchez manages to be re-elected.

Unlike the positive revision of expected growth for 2023, the Executive has cut its expectations for next year. A year in which the GDP is expected to advance by 2.4%, four tenths less than the Government itself predicted in April. The outbreak of the war in Gaza and the war in Ukraine cause the Executive to place “geopolitical tensions and conflicts” as “the main risk factor for the economy due to its potential impact on energy markets and economic activity in Europe.” and worldwide”.

“The conflict in the Middle East broke out a few days ago and we are seeing the short-term effect,” said the Secretary of State for Economy and Business, Gonzalo García, in statements to the press this Monday.. “The forecasts are prudent and reflect a scenario of volatility and possible risks of pressure on international energy prices,” he added.

Regarding the drag on growth that interest rate increases will pose – whose effect on the economy will be fully felt in 2024 – García recognizes the adverse effect they are having on mortgages and investment. However, the Secretary of State has defended that employment, salary income or the deployment of the recovery plan will more than offset the negative impact of monetary policy.

Regarding employment, the Executive trusts that between 2023 and 2024 700,000 full-time jobs will be created and that the unemployment rate will fall below 11% next year. Along these lines, it is expected that salaries will continue to recover purchasing power with a growth in salaries that would exceed the increase in consumer prices.

Regarding public finances, the Government maintains its objective of reducing the deficit to 3% of GDP in 2024. Which in principle would require a fiscal adjustment of about 12,000 million, as long as the objective set for 2023 of 3.9% is met.. Regarding public debt, the plan is to bring it to 106.3% next year.

The unknown remains about energy support

Since the General State Budgets (PGE) have not begun to be processed, the Government has proposed a budget scenario that does not include new spending or income measures.. With exceptions such as the revaluation of pensions in accordance with the CPI or the increase in public salaries, which are expenses that were already planned.

In principle, if the Budget Plan is followed, the energy support measures for homes and companies that expire on December 31 would not be renewed. However, the Executive has made it clear that it does not rule out extending some or introducing new ones if it manages to revalidate its mandate in the coming weeks or months.. “There is no decision made regarding possible changes to the measures that expire at the end of the year,” said García, who added that it will be the new Government that will decide when it starts working.

It is worth remembering that, among the measures that are in the air, are the entire tax reduction on the electricity and gas bill (the taxation is practically at the legal minimum); the Iberian mechanism to lower the wholesale price of electricity; the VAT reduction on certain basic foodstuffs or discounts on fuel for professional use by transporters.