Upward revision of forecasts: Spanish economy will grow by 2.1% in 2024, but challenges persist

The BBVA Research Department has revised upwards its growth forecasts for Spain's Gross Domestic Product (GDP) in 2024, increasing from the initially projected 1.5% to 2.1%. This improvement is based on the decrease in energy costs, the positive impact on inflation, and the adjustment of interest rates. However, for 2025, the GDP growth forecast has been reduced from 2.5% to 2.0%. According to the data presented by Rafael Doménech, Head of Economic Analysis at BBVA Research, the Spanish economy experienced a growth of 0.6% in the first quarter of 2024, which annualized would represent an advancement of 2.4%. This quarterly growth is in line with the closing of 2023, where a 0.6% growth was recorded in the last quarter. Macroeconomic indicators point to a favorable outlook for the Spanish economy in the coming months; however, concerns persist regarding the weakness in private investment, productivity, the shortage of skilled labor, and uncertainty in economic policy. Regarding inflation, it is expected to decrease, reaching 3.1% in 2024 and 2.3% in 2025. The European Central Bank (ECB) would be adjusting its monetary policy interest rate downwards starting in June, six months earlier than anticipated. The report highlights progress in the Spanish economy, such as growth in both private and public consumption, as well as positive performance in the export of goods and services. Additionally, industrial production shows signs of recovery driven by various factors such as the reduction in energy and transportation costs. On the other hand, BBVA Research points out persistent restrictions in the labor market that could limit employment growth, such as the lack of skilled labor and population aging. Likewise, potential risks are identified in the housing sector, especially in relation to policies that could generate inequality and increase prices without improving accessibility. Regarding economic evolution in the eurozone, a slowdown in growth is expected in certain sectors and countries, which will require significant adjustments in various economies, including the Spanish economy, starting in 2025. In summary, Spain's economic outlook shows signs of short-term improvement, with an upward revision in growth for 2024, but challenges and risks persist that could influence medium-term growth, especially in a context of political and economic uncertainty at both national and eurozone levels.