BBVA Research has raised its forecast for Spain's GDP growth to 2.4 percent in 2023, up from its previous forecast of 1.6 percent in March. According to the latest ’Spain Economic Outlook’ paper published on Tuesday, this improvement is explained partly by revisions made by the Spanish statistics office, INE, but also by a surprisingly positive performance in exports, which offsets for slack internal demand. However, the BBVA research unit has lowered its growth forecast for 2024 from 2.6 percent to 2.1 percent, as uncertainty is expected to worsen across the world economy next year.
Improved momentum in late 2022 and more vigor than expected in the second quarter of 2023 account for about half of the improvement in the growth forecast for this year, as explained by BBVA Research in its latest 'Spain Economic Outlook' paper. On one hand, the Spanish statistical office, INE, revised GDP for the second half of 2022 upward by almost half a percentage point. On the other, BBVA analysts estimate that the Spanish economy could show growth of 0.7 percent in the second quarter of 2023, four tenths of a point more than the expectation three months ago.
Exports are behind the economy's strong performance, with a particularly important contribution from services. Based on data available up to the first quarter of the year, sales to the rest of the world are now almost 13 percent above the levels reached just prior to the start of the pandemic. Firstly, consumption by non-residents in Spain continues to contribute positively to the advance of the economy: according to data on card purchases by foreign nationals at BBVA point-of-sale terminals, in the second quarter of the year, spending levels could reach 60 percent higher than those observed in the same period of 2019. The main beneficiaries are beach destinations and cities that used to have an intense urban tourism traffic. In any case, the contribution to growth by non-tourist service exports has been more important. These have increased by 30 percent since the end of 2019 and now account for almost 9 percent of GDP.
Companies are creating jobs at a pace that would add almost 500,000 jobs over the year.
Employment and prices also show a more positive performance than expected in March: companies are creating jobs at a pace that would add almost 500,000 jobs over the year, double what was forecast in March. Likewise, from February through May, inflation has shown data consistent with a decline that can be sustained over time, reaching averages of 3.4 percent in 2023 and 3.2 percent in 2024.
Slower growth by 2024
BBVA research unit has lowered its growth forecast for 2024 from 2.6 percent to 2.1 percent, as uncertainty is expected to worsen across the world economy next year. The BBVA analysts expect several factors to shape economic growth going forward. There are doubts as to how much longer growth can be sustained in some sectors, for instance.
Several indicators point to the accommodation and hospitality industry soon to be at around 2019 levels of capacity usage. Restrictions on the expansion of hotel supply make it unlikely that additional increases in demand will be matched by further availability of beds. There is also uncertainty as to whether the recent growth in non-tourism services exports is sustainable. Finally, the drought has been a major blow to the agrifood sector.