The improvement in the Bank of Spain's forecasts - in line with what the Spanish government itself and international entities have done in recent weeks - is due to the good performance of activity in the second half of this year, in particular, private and public consumption.

The Spanish central bank highlighted, in the report with the new estimates, that GDP growth in 2024 and 2025 will be essentially sustained by domestic demand and, above all, by private consumption, due to the positive evolution of disposable income, the labor market, family confidence and the expected increase in population.

Investment, which continues to be the most fragile component of domestic demand, will also increase its contribution to Spanish GDP growth in the coming quarters, driven by the execution of European funds and better financing conditions (credit), according to the Bank of Spain .

As for inflation, the central bank maintained the latest forecasts, which are 2.9% for 2024 and 2.2% in 2025.

The Bank of Spain predicts, on the other hand, that the unemployment rate in the country, which has one of the highest values ​​in the entire European Union, will continue to fall in the coming years, from 11.5% in 2024 to 9.9% in 2027 .

The forecasts for the public deficit for this year worsen by a tenth, with the central bank now estimating it to be 3.4% of GDP, due to expenses associated with the October 31st floods in the Valencia region.

In 2025, the Spanish public deficit should fall to 2.9% of GDP, according to the Bank of Spain.

As for Spanish public debt, the central bank predicts that it will remain at 103.1% of GDP this year and 102.6% in 2025.

Last month, the European Commission (EC) also improved the outlook for Spain's GDP.

The EC now predicts that Spain will grow by 3% in 2024 (five tenths more than the 2.5% GDP increased in 2023).

According to the EC, Spanish inflation should be 2.8% this year (it was 3.4% in 2023) and the unemployment rate should be 11.5% (12.2% in 2023).

The EC maintained, on the other hand, the public deficit estimate of 3% of GDP this year in Spain (it was 3.5% in 2023).

For 2025, Brussels predicts that Spain's GDP will grow by 2.3%, that inflation will be 2.2%, that the unemployment rate will fall to 11% and that the public deficit will decrease to 2.6% of GDP.

Spain's growth is due to consumption, "sustained by the continued resilience of the labor market, and the reinforcement of investment", according to the European Commission (EC) last month.

"Economic activity [in Spain] maintained its dynamics in the first half of 2024, supported by the strong evolution of consumption and the boost in tourist activity. Economic expansion should continue in the second half of the year", according to the EC.