Bank of Spain lifts growth outlook for 2024, still a slowdown
By Jesús Aguado
MADRID (Reuters) – The Bank of Spain on Tuesday upped its 2024 economic growth outlook, expecting a more moderate slowdown from 2023 thanks to a positive carry-over effect from a strong fourth quarter and the diminishing negative impact of monetary policy tightening.
In its quarterly outlook update, the central bank put this year’s growth at 1.9%, slightly above the 1.6% expected previously and more in line with the government forecast of 2%.
“The main factors behind the revision this year are the lower energy prices, and the partial extension of some of the measures to cope with the inflationary episode,” Bank of Spain chief economist Angel Gavilan said.
Last year, Spain’s economy expanded 2.5%.
In the first quarter, the central bank expected quarterly growth to slow to 0.4% from 0.6% the preceding three months due to lower private consumption.
It also maintained its 2025 and 2026 growth forecast unchanged at 1.9% and 1.7%, respectively.
Despite a recent moderation in its growth rate, Spain’s output would still be clearly above the 0.6% forecast by the European Central Bank for the euro zone in 2024.
Gavilan mentioned the contribution of foreign workers to the labour market and also higher deployment of European relief funds as factors that would overall boost Spain’s economy, especially in 2025-2026.
Spain’s EU-harmonised consumer inflation should ease to 2.7% this year from 3.4% in 2023 as the bank expected a gradual moderation in the pace of food price rises and core inflation, and then further fall to 1.9% and 1.7% in the following two years.
It forecast the unemployment rate will continue declining to 11.6% in 2024 and on to 11.3% by 2026, from 2023’s 12.1%.
The central bank expects the budget deficit to drop to 3.5% this year from 3.8% in 2023 and stay at that level in the coming two years.
For Spain to meet the EU recommendation by 2024 – which requires that nominal growth in expenditure does not exceed 2.6% – additional spending adjustment or revenue increases may be necessary, it said.
