Government’s 2024 Budget Plan improves this year’s forecast by 3/10 of a percentage point, but cuts next year’s by 4/10

nadia calviño 2Spanish Ministry of Economy, Nadia Calviño

CdM| The government has updated its macroeconomic picture for the next two years, and now expects the Spanish economy to grow by 2.4% this year – compared to the 2.1% estimated in spring – and by 2% the following year – compared to the 2.4% first estimated.

This is included in the 2024 Budget Plan that the Executive sent yesterday to the European Commission, which stresses that the Spanish economy will evolve at a better pace than the average for the euro area “for the fourth consecutive year”.

The improvement in expectations for 2023 is due to the “positive surprise of exports of non-tourist services”, which has offset the effect of a “more contractionary than expected” monetary policy, thus producing a greater slowdown than expected in the second half of the year.

Pedro Sánchez’s government is thus in line with the forecasts of the International Monetary Fund (IMF) for this year, although it is more optimistic than organisations such as the Bank of Spain, the Independent Authority for Fiscal Responsibility (Airef), the Organisation for Economic Cooperation and Development (OECD) -2.3%, all three, and the European Commission -2.2%.

Despite raising its forecast for 2023, the government is forced to lower its estimate for 2024 by four tenths of a percentage point, due to “the lower growth projected for the euro area”. However, it predicts that consumption and investment will accelerate their growth and, “despite the more persistent than expected tightening of monetary conditions, the Spanish economy will maintain its dynamism”.

The Independent Authority for Fiscal Responsibility (AIReF) endorses the Government’s macroeconomic scenario accompanying the Budget Plan for 2024, as they are within the central range of its estimated bands, albeit at the upper limit, denoting the existence of possible downside risks. However, while endorsing the projections, it considers that downside risks to the government’s economic growth dominate in 2024.

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