Like much of Europe, Spain’s GDP has taken a hit thanks to the impact of the coronavirus crisis, the increasing price of fuel, and the war in Ukraine. But the Spanish economy is recovering from these set backs much faster than expected. As a result, the European Commission has increased its economic growth projections for Spain in 2023.
What changes have been made? And how might this impact your life if you’re currently living in Spain? Here’s everything you need to know:
What Is The Forecast Growth To Spain’s GDP?
By the end of the year the GDP in Spain is expected to have grown by 2.2%. This growth forecast has increased by three tenths when compared to the last forecast which was released in May. This is great news for the Spanish economy.
The forecast for 2024 has been downgraded slightly to 1.9% which is one-tenth lower than the figure which was released in May. This slight predicted contraction is due to a potential year-end weakness in the country as a result of a decline in tourism and exports. However it’s important to note that Spain has exceeded Brussels’ expectations all year and the figures have been adjusted as a result, so this forecast for next year may be increased at intervals.
The current 2023 data from Brussels is perceived to be accurate as it aligns with other analysis and data from inside Spain. Spain’s National Statistics Institute (INE) also adjusted their forecasted figures upwards earlier in the year.
At a recent press conference, the European Commissioner for Economy, Paulo Gentiloni said that Spain "has exceeded our spring expectations."
What Impact Will The Political Situation In Spain Have On The GDP?
This is a question that was raised by a journalist at the same press conference. During this, Gentiloni dismissed claims that the Spanish political situation posed a risk to the economy or could cause delays in the implementation of the Recovery and Resilience Plan.
He stated that "No, we are not worried. If you look at the forecasts that we have presented, Spain has a fairly good situation, better than other countries in terms of growth or inflation prospects." In the same statement the European Commissioner drew attention to the Spanish government’s commitment to “avoiding any delay in the deployment and execution of Next Generation EU funds.”
How Does Spain Compare To Other EU Countries?
Compared to other countries within the EU, the Spanish GDP is performing very well. The average growth in the Eurozone sits at 0.8%, which Spain has significantly surpassed. If Spain does achieve the growth that has been forecast then its growth would be more than double that of France and Italy, who have been forecast growth of 1% and 0.9% respectively.
It's important to note that all these countries recovered their pre-pandemic GDP levels much faster than Spain, which achieved this milestone in the first quarter of the current year, but Spain has then continued to accelerate its growth.
What Impact Will This Have On People Living In Spain?
These percentages and statistics are all well and good, and are a positive indicator of a robust and healthy economy. But if you’re living in Spain then it’s likely what you really want to know is how this will impact you.
What we know at this point is that the commission has predicted that consumer prices in Spain will rise by 2.9 percent in 2024. This is two tenths higher than the previous analysis, and still above the European Central Bank's (ECB) 2 percent target. In real terms this means that the prices in the shops are going to continue to go up. At the end of the year we will also see energy price reduction measures stop, which means that prices may also continue to rise upwards initially, although this is expected to diminish throughout 2024.
Whilst much of the news is positive, the Commision has cautioned that this sustained growth can’t last forever. The boost from tourism is anticipated to fade, and the economic slowdown in Spain's major trading partners will result in a decline in exports. Households should also be prepared for higher mortgage payments.
But the recovery in Spain still looks good, and the country is holding its own and exceeding expectations when compared to the rest of the EU.
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