Spain Economic Outlook. December 2024

Summary

Spanish GDP growth is revised upward to 3.1% in 2024, driven by private consumption and a dynamic labor market. A moderation is expected for 2025 and 2026 due to global trade uncertainty and the limited effects of the DANA, although the economy will maintain its resilience.

Key points

• Key points:
• The economic impact of the DANA is estimated to subtract between 0.0 and 0.1 percentage points from growth in 2024, and between 0.1 and 0.4 points in 2025, depending on the speed and effectiveness of public reconstruction policies.
• The possible imposition of tariffs by the new US administration could reduce Spanish GDP growth by 0.2 percentage points in 2025 and 0.7 points in 2026, negatively affecting exports.
• Headline inflation will converge towards the 2% target, favored by falling oil prices, which will allow the European Central Bank to continue reducing interest rates to stimulate activity.
• Housing construction will remain insufficient to meet demand driven by job creation and demographics, with an expected deficit of 240,000 homes per year that will maintain upward pressure on prices.
• The challenge of fiscal consolidation will require new measures to comply with European rules, with the public deficit expected to close at 3.0% of GDP in 2024 and progressively decline amid political uncertainty.

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