Funcas raises its growth forecast for the Spanish economy by half a point in 2023, up to 1.5%

He anticipates that Spain will reach its pre-pandemic level by the end of this year.

Funcas raises its growth forecast for the Spanish economy by half a point in 2023, up to 1.5%

He anticipates that Spain will reach its pre-pandemic level by the end of this year

The Savings Banks Foundation (Funcas) estimates that the Spanish economy will grow by 1.5% this year, half a point more than the previous estimate, and forecasts growth of 1.4% in 2024, four tenths less, according to its economic forecasts for Spain 2021-2023 published this Monday.

"The behavior in 2023 will be somewhat better than anticipated and in 2024 it will be somewhat worse," explained the general director of Funcas, Carlos Ocaña, at a press conference to present the update of the economic forecasts for Spain for the period 2023-2024.

Ocaña explained that in 2023 the behavior of the Spanish economy will be "uneven", with a first semester in which higher growth rates will be registered than in the second part of the year.

Specifically, Funcas has anticipated quarter-on-quarter growth of 0.4% in the first quarter, 0.3% in the second quarter, 0.1% in the third quarter and the year would close with zero growth and then return to recover at the beginning of 2024. Despite this, Spain will be able to reach the levels of economic activity prior to the pandemic at the end of this year.

Among the factors that are playing in favor of the Spanish economy this year are the better behavior of energy prices, the full normalization of tourism --which should exceed pre-pandemic levels next season-- and the better rate of execution of the European funds. "All these factors are going to boost the economy, particularly in the first half of the year," Ocaña assured.

On the contrary, in the second half of the year other less favorable factors will gain more weight, such as the contractive effect of monetary policy and financial tensions. "This will lead to the behavior of the economy in the last two quarters of 2023 being less dynamic," Funcas pointed out.

In 2024 Funcas has cut its forecasts because a slowdown in domestic demand is anticipated due to these contractive elements mentioned and because the country's fiscal policy will no longer be able to be so expansive given the reactivation of European fiscal rules and in a context of rising interest rates.


As explained by the director of Conjuntura, Raymond Torres, the fall in energy prices will help moderate inflation, although it will continue to be above the ECB's target. The household consumption deflator will increase by 4.3% this year and 3.4% next year.

For its part, the GDP deflator --which measures the pressure of domestic prices, that is, discounting imported costs-- will rise more vigorously, 4.8% in 2023 and slow to 3.2% in 2024.


Raymond Torres explained that the reduction in VAT on certain basic foods -- which came into effect at the beginning of this year -- is having "little impact" on food inflation. "Other factors can be more, such as the increase in the costs of fertilizers that was registered last year, of feed or of the prices paid by farmers," Torres pointed out.

These factors have erased the impact that the VAT cut could have on food in general, although occasionally it could have had an effect, according to Torres.

In any case, from Funcas they have insisted that measures such as the VAT reduction can only have specific effects and cannot break a price dynamic. In addition, they have pointed out that when applied to all consumers and not to the most vulnerable, they are registering a high budgetary cost in relation to their final result.


The labor market will remain one of the main resistance factors of the Spanish economy. Despite the slowdown in activity, Funcas forecasts the creation of close to 200,000 net jobs this year (in full-time equivalent terms) and another 170,000 in 2024. The unemployment rate will drop to 11.9% in 2024, a level still high in European comparison.

The extra income caused by inflation and the new taxes will allow a decrease in the public deficit. But the cut will be slight, up to 4.5% of GDP in 2023, due to the slowdown in the economy, the anti-inflation measures, the indexation of pensions and the higher financial charges due to the rise in rates. By 2024 it is expected to drop to 4.3%. That year the public debt will be around 110% of GDP.


The persistence of a public deficit of more than 4% is one of the biggest threats to the Spanish economy, in a context of withdrawal of ECB support in terms of interest rates and the purchase of public debt. But the most worrying risk is a more intense financial disturbance than expected, according to a warning from Funcas.

Under the hypothesis incorporated in this forecast of an additional rise in interest rates of 75 basis points, interest payments by households would increase by 16,000 million euros and those of non-financial companies by 24,000 million. A more abrupt increase in financial charges than anticipated would increase the risk of default in the most vulnerable sectors, warns Funcas.