Alex Trelinski
THE Bank of Spain has raised this year’s economic growth forecast and also upgraded its prediction for 2025.
That’s in spite of the Valencia flood disaster and a slow down in the euro zone.
The bank now expects gross domestic product to expand 3.1% in 2024 rather than 2.8% which was projected in September- up from last year’s 2.5% increase.
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It’s the third time this year that the Bank of Spain has upped its growth forecast from the original 1.9% figure.
In the fourth quarter of 2024 alone, GDP should grow 0.6%-0.7% from the previous quarter, when the expansion was 0.8%, slowing down mainly because of the negative impact of the flood disaster.
But the bank said billions of euros in reconstruction spending announced by the government, as well as a carry-over effect from higher growth in 2024, should help the economy grow 2.5% next year, above its previous forecast of 2.2%.
The spending to rebuild flood hit areas of Valencia province is likely to cost the equivalent to 0.5% of GDP, mainly this year, when the bank expects a higher budget deficit of 3.4% than 3.3% forecast earlier.
Next year, however, it sees the budget gap narrowing to 2.9%, dropping just below the European Union’s 3% threshold one year earlier than previously envisaged.
The Spanish economy’s good health, buoyed by tourism and to a lesser extent manufacturing, contrasts with the middling performance of its euro zone neighbours.
The Bank of Spain also expects the unemployment rate to gradually fall to under 10% by 2027, a level not seen since 2008, from the current 11.21%.
