This Monday the OECD has improved its economic forecasts for Spain in 2024. The update suggests that the GDP will advance somewhat more than initially expected and, on the contrary, the rise in prices will be more contained. Specifically, the international organization predicts economic growth of 1.5% for this year, which represents the greatest advance among those forecast for the four large European economies, although it will also foreseeably be where prices rise the most.
The think tank of developed economies has raised its growth forecast for Spain by one tenth, compared to the 1.4% estimated in November. Despite the upward revision, the OECD confirms that 2024 will be a year of economic slowdown, compared to the 2.5% increase recorded in 2023. “Recent indicators point to a certain moderation in growth, due to the effects of the tightening of financial conditions that persist in the credit and real estate markets, and to global trade that remains moderate,” the report explains as a general trend worldwide. Instead, Spanish GDP is expected to rebound in 2025 with 2% growth, an estimate that remains intact with respect to previous forecasts.
The projected figures for Spain are significantly above the estimates predicted for the other three large European economies, as well as for the eurozone as a whole.. In fact, the Iberian country is the only one for which the OECD has revised its forecasts upwards.. In the case of Germany and France, it has lowered them by three and two tenths respectively to 0.3% and 0.6% in 2024, while it predicts advances of 1.1% and 1.2% in 2025.. For its part, for Italy it maintains the growth forecast of 0.7% for this year and 1.2% for next year.
The Spanish economy already showed its resistance last year, with an acceleration of 0.6% in the fourth quarter that contrasted with the general stagnation of the large European economies. In fact, the push from Spain and the southern countries allowed the eurozone to avoid recession in the final stretch of the year.. After growing just 0.5% in 2023, the OECD has cut its forecasts for 2024 and 2025 for all the partner countries of the single currency to 0.6% and 1.3% respectively.
The international organization points out that the economic slowdown of most European countries in 2023 has been offset globally by the strong growth of the United States (2.5%) and emerging economies such as China, India, Indonesia or the Turkey, where annual advances of over 4% have been recorded. Overall, world GDP grew by 3.1% in 2023. The OECD expects the advance to moderate to 2.9% in 2024 and 3% in 2025.
Inflation moderates
Regarding prices, the international organization has improved its forecasts for Spain in 2024, although it points out that they will still remain above the 2% objective to which the European Central Bank (ECB) intends to return them.. Specifically, the OECD has revised the estimated inflation for this year down four tenths to 3.3% and predicts that the moderation in prices will continue in 2025 with an increase of 2.5%, two tenths above its previous forecast.
Along the same lines, AIReF also cut its estimate of price growth for 2024 to 3.3% at the end of January.. The institution based its review on the moderation of inflation observed in the last months of 2023 and on the partial extension of the anti-crisis measures imposed by the Government to cushion the price crisis. A few weeks ago, Congress validated the extension of the VAT reduction on basic foodstuffs and electricity – raised from 5% to 10% -, among other measures that will have a positive impact on prices, according to forecasts.
Even so, the CPI variation rate forecast for Spain in 2024 and 2025 is the highest among those forecast for the large European economies.. The international organization forecasts inflation of 2.7% and 2.6% in France and Germany respectively this year, which is expected to moderate in 2025 to 2.1% and 2%.. On the other hand, in Italy, the evolution of prices is expected to be the opposite, with a slowdown in the rate of increase to 1.8% in 2024 and a rebound to 2.2% in 2025.
In the eurozone as a whole, the OECD forecasts that inflation will moderate to 2.6% in 2024 and will remain on that path to drop to 2.2% in 2025, thus approaching the 2% target. The ECB closely monitors price behavior to set the course of monetary policy in the eurozone. At its January meeting, the organization kept interest rates unchanged at 4.5% for the third consecutive time. The president of the institution, Christine Lagarde, pointed out that it is still premature to discuss a rate cut, although she acknowledged a few weeks ago that it is “likely” that the first relief will arrive in the summer.
“Monetary policy must remain prudent to ensure the lasting containment of underlying inflationary pressures,” asks the OECD in its report. “There is room to lower official interest rates as inflation declines, but monetary policy should remain restrictive in most major economies for some time,” he adds, while warning of the effects of high rates. interest rates on the economy. “Growth could also be weaker than expected if the lingering effects of previous interest rate hikes were stronger than expected,” it warns.
The “risk” of the Red Sea
The Paris-based organization also warns that the conflicts in the Middle East and, in particular, the attacks on ships in the Red Sea “have sharply increased transportation costs and have lengthened delivery times for goods, disrupting schedules. of production and increasing pressures on prices”. Specifically, it points out that they would represent “a significant short-term risk for activity and inflation” if they have repercussions on the energy markets. Therefore, he points out that “it is too early to ensure that the underlying pressures on prices are fully contained.”
In the case of Spain, the OECD forecasts underlying inflation of 2.7% in 2024 from the 4.1% recorded in 2023, four tenths less than previously expected. In 2025, the deceleration of this indicator would continue, which excludes the price of energy and unprocessed food from the calculation due to their high volatility, reaching a rate of 2.1%, one tenth below the previous projection. The underlying rate of the eurozone would fall in 2024 to 2.6% and in 2025 to 2.2%.