The Bank of Spain improves forecasts: growth of 2.3% and challenges to face

The Bank of Spain has improved its growth forecast for this year to 2.3%. This news has been received with optimism in the Spanish economic sphere, as it represents a significant improvement compared to previous estimates and reflects the strength that the country's economy is showing, largely driven by the tourism sector. The boom in tourism, the positive tone of employment, and the leading indicators of business activity have been the main factors leading the Bank of Spain to revise its projections upwards. The tourism sector has experienced a strong boost, especially during the first quarter of the year, with a 0.7% increase in GDP and a 19% growth in quarterly tourism sales. This trend has been favored by an exceptional Easter week and an increase in tourist arrivals, as well as higher average spending. However, the Bank of Spain warns that this boost could be temporary due to the volatility that typically characterizes this sector. For the next quarter, it is expected that growth will remain around 0.5% quarterly, although with some uncertainty due to the evolution of the pandemic and other external factors. From the second quarter onwards, growth rates will tend to gradually moderate, converging towards more sustainable rhythms for the Spanish economy. A growth of 1.9% in 2025 and 1.7% in 2026 is projected, although these figures could vary depending on the evolution of the international situation and fiscal policies. One aspect that raises concern is the compliance with the new European fiscal rules, which will require a multi-year adjustment plan to reduce the public deficit. The Bank of Spain warns that the public accounts gap will remain above 3% of GDP in the coming years, which could affect economic growth. Emphasis is placed on the importance of implementing a fiscal plan that allows reducing the budget deficit and ensuring long-term economic stability. Regarding inflation, it is expected to remain at slightly higher levels than previously forecast, with an annual average of 3% for this year. This increase is due to various factors, such as the reversal of measures to combat price shocks in energy and food, the rise in oil prices, and the persistence of inflation in services, especially in the tourism and hospitality sector. A moderation in inflation is expected for next year, reaching 2%, in line with the ECB's objectives. Regarding the labor market, the Bank of Spain points out that the unemployment rate will not fall below 11% until 2026. Despite the intense pace of job creation, a moderation is expected in the coming years due to the arrival of immigrants who will keep the percentage of unemployed stable. A slight recovery in productivity is expected, although it is acknowledged that it will remain weak in the coming years. In the business sphere, it is highlighted that employment has been mainly created in large companies rather than in small and young ones. Companies show a certain degree of uncertainty and regulatory obstacles as the main barriers to investment, and only a minority have applied for European funds to boost their investments. Warnings are issued about the geopolitical and financial risks that could affect the Spanish economy in the coming years. In summary, the economic projections of the Bank of Spain reflect an improvement in growth and a certain stability in the labor market. However, there are challenges both internally and externally that could influence the evolution of the Spanish economy in the coming years. It is essential to maintain a balance between fiscal policies, business investment, and financial stability to ensure sustainable long-term growth.