It estimates that it will slow down from 3.8% in 2023 to 1.2% in 2024 and predicts that it will be 1.7% and 1.5% in 2025 and 2026, respectively.
MADRID, 17 Mar. (EUROPA PRESS) -
The Bank of Spain has warned that if public consumption does not slow down in 2024, there would be a risk for the growth forecast of the Gross Domestic Product (GDP), but also for the public deficit.
For this year, the Bank of Spain assumes a moderation in the pace of growth of public consumption, in the context of the European recommendation to contain spending, as can be seen in the latest quarterly report published by the organization a few days ago.
Furthermore, finally the extension of the 2023 Budget for this year will favor a certain containment of public spending, since there will be budget items that, in the absence of public accounts, cannot be executed.
Specifically, the estimates of the organization directed by Pablo Hernández de Cos suggest that, after growing by 3.8% in 2023, this item will slow down its momentum in 2024 to 1.2% and will stand at 1.7% and the 1.5% in 2025 and 2026, respectively.
But the report warns that greater public consumption than estimated in this central scenario would put additional pressure on public accounts, which would reaffirm the need to undertake a rigorous process of fiscal consolidation in Spain.
The advance of the National Accounts for the fourth quarter of 2023, together with the review of data from previous quarters, have provided a considerable upward surprise in relation to the behavior of public consumption.
Thus, for the year as a whole, this item would have increased by 3.8% in real terms - compared to the 2.2% forecast in the Bank of Spain's projection exercise in December - a rate much higher than that observed in 2022 and even during the period of greatest incidence of the pandemic.
Both the remuneration of employees and the rest of the public consumption items would have contributed to this acceleration, which can also be seen in nominal terms.
In this way, as a percentage of potential GDP, public consumption would have been at a level very close to the historical maximum it reached in 2009.
Looking ahead to 2024, the agency has warned that, to the extent that the recent evolution of this item - about whose determinants there is considerable uncertainty - may not respond to transitory factors, such as possible expenses related to the NGEU program or other temporary measures, this greater public consumption would put additional pressure on public accounts, which would reaffirm the need to undertake a rigorous process of fiscal consolidation in Spain.
For their part, the estimates for private consumption are the opposite. In fact, it is expected that this factor, together with investment, will be the main drivers of Spanish economic activity in the coming years.
After moderating somewhat more than expected in the last months of 2023, private consumption would have maintained a growth rate similar to that of the fourth quarter of last year at the start of 2024.
This advance would be supported, among other factors, by the strength that the labor market continues to show, by the high starting levels of the savings rate and by the gradual recovery of consumer confidence, particularly among those located in the lower strata. middle and high income.
In any case, the recent evolution of consumer credit and automobile sales suggests that the boost to consumption provided by household spending on durable goods would be declining.
Looking ahead to the coming quarters, in a context of progressive moderation of inflationary pressures, relative robustness of the labor market and somewhat more favorable financial conditions, household spending is expected to continue its expansionary trend, so that the The pace of growth of this component of demand would be, for this year as a whole, somewhat higher than that observed during 2023 (1.8%).
Specifically, estimates from the Bank of Spain suggest that private consumption will increase by 2.3% in 2024; 1.9% in 2025 and 1.7% in 2026.
