Quarterly Report on the Spanish Economy and Macroeconomic Projections (2024 Q4)
Bank of Spain
November 28, 2024
Introduction
The Bank of Spain’s Quarterly Report on the Spanish Economy and Macroeconomic Projections provides a comprehensive analysis of the current state and future prospects of the Spanish economy. This report presents the findings of the latest assessment, covering the fourth quarter of 2024.
Current Economic Situation
Economic Growth
The Spanish economy is projected to grow by 0.5% in 2024 Q4, down from 0.8% in the previous quarter. This slowdown in growth reflects the impact of global economic headwinds, including:
- Slowing global demand
- Elevated inflation
- Rising interest rates
Employment
The labor market remains strong, with the unemployment rate holding steady at 12.5% in 2024 Q4. However, job creation is expected to slow in the coming months as economic growth decelerates.
Inflation
Inflation remains elevated, with the harmonized index of consumer prices (HICP) increasing by 5.0% year-on-year in 2024 Q4. While the rate of inflation has cooled slightly since the peak in mid-2023, it is still above the European Central Bank’s (ECB) target of 2.0%.
Macroeconomic Projections
Economic Outlook
The Bank of Spain projects the following economic trajectory for Spain:
- GDP growth to average 1.4% in 2025
- GDP growth to accelerate to 1.8% in 2026
- Unemployment rate to gradually decline to 11.5% by 2026
Inflation Outlook
Inflation is projected to gradually decline over the forecast horizon:
- HICP inflation to average 4.0% in 2025
- HICP inflation to further decline to 2.5% in 2026
Fiscal Outlook
The government deficit is projected to narrow to 5.6% of GDP in 2025 and further to 5.0% of GDP in 2026. This improvement is primarily driven by the projected economic recovery and gradual reduction in inflation.
Risks to the Outlook
The Bank of Spain identifies the following risks to the economic outlook:
- A deeper-than-expected slowdown in the global economy
- Prolonged high inflation
- Adverse developments in financial markets
Policy Recommendations
The Bank of Spain recommends the following policy measures to address the economic challenges and support the recovery:
- Continued fiscal and monetary support
- Structural reforms to boost productivity and growth
- Measures to address the energy crisis
Conclusion
The Spanish economy is expected to continue growing in 2024 Q4, albeit at a slower pace. Inflation remains elevated but is projected to decline gradually. The government is taking steps to reduce the fiscal deficit and implement structural reforms. However, the economic outlook is subject to risks, including the global economic slowdown, inflation, and financial market volatility. The Bank of Spain recommends continued policy support and structural reforms to address these challenges and support the long-term recovery of the Spanish economy.
Quarterly Report on the Spanish Economy and Macroeconomic Projections (2024 Q4)
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