The International Monetary Fund (IMF) warned this week that the new price escalation derived from geopolitical tensions in Ukraine and Gaza, the persistence of underlying inflation in countries with labor shortages or the delay of the European Central Bank (and other issuers) to start lowering interest rates could pose a risk to the global outlook. They are not new challenges and global economies have already had to battle with them over recent years. The Spanish company, specifically, has resisted its impact better than others in the environment and achieved growth of 2.5% in 2023.
This greater-than-expected advance was achieved largely thanks to the growth in GDP in the last quarter of the year, when it grew at 0.6%. The economic indicators that have already been published suggest that this dynamism would have been even greater between January and March. The Independent Authority for Fiscal Responsibility (AIReF), which has just updated its forecast model for the evolution of the Gross Domestic Product (GDP) in real time (MIPred), specifically points to a quarterly growth of 0.7% with 81 % of available indicators.
In year-on-year terms the advance would be 2.2%. Among the data that supports this better performance would be the good performance of employment (Social Security exceeded 21,032 million contributors in March, discounting seasonality and the calendar effect, its best figure in the historical series), as well as that of the activity of the services sector, electricity consumption or industrial production. All would allow the economy to grow one tenth more from January to March than it did in the fourth quarter.
Positive outlook with important challenges ahead
In principle, the supervisory body estimates that the economy will advance by 2% for the year as a whole and that the public deficit would moderate to 3% of GDP. In the medium term, however, growth will progressively converge towards its long-term potential, which is around 1.3% (the authority foresees an advance of 1.8% in 2028), the deficit will stabilize above 3% and the debt will remain above 100% of GDP, so additional adjustments will be necessary to comply with the new European fiscal framework.
Investment and private consumption, which have still not recovered the levels prior to the outbreak of the pandemic, are two of the factors that can most condition the performance of the national economy in the medium or long term, according to Funcas. The Savings Bank Foundation drew a scenario in which activity will slow down somewhat this year due to the lower contribution of public consumption and the foreign sector, two of the cornerstones of the recovery after Covid.
In the opposite direction, the boost will come – this time – from private consumption thanks to the creation of jobs and the disbursement of part of the savings accumulated over the last year. “It is important to address the concerns of the business sector and reduce uncertainty to stimulate investment growth and strengthen the fundamentals of the Spanish economy,” says Javier Molina, senior market analyst for eToro.
Among the large pending accounts at the national level continue to be an unemployment rate that has structurally doubled that of the European Union (EU) for decades and increasing public spending. These are two more of the great challenges facing the Spanish economy, which took three and a half years to recover the level of GDP prior to the Covid-19 pandemic, more than double the average of the countries of the European Union. , they highlight in Cobas Asset Management.
The manager points out that Spanish public spending amounted to around 640,000 million euros last year, the highest figure in history. Disbursements from the State and Social Security totaled more than 450,000 million, and financial disbursements became the third item by volume, with 133,000 million. The State faced this increasing public spending with a total budget of 583,000 million, almost 40% more than the amount budgeted in 2014, which amounted to 423,000 million euros.
