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Markets kicked off 2024 with risk appetite, supported by rhetoric of a soft landing in the major advanced economies and a positive assessment of the macroeconomic data.

Economic activity is showing signs of a slowdown and inflation fell below 2% in March for the first time since August 2024.

The CaixaBank Research real estate clock shows the evolution of home prices and sales in Spain throughout the cycle. In 2024, the «clock» will remain in the slowdown quadrant, before giving way to 2025, when we expect the housing market to return to expansive territory.

With the 2023 data now published for almost all the main macroeconomic variables, we have revised our macroeconomic forecast scenario for the Portuguese economy for 2024-2026. That said, the changes are not particularly significant, with the exception of the forecasts related to the real estate market.

Following the rally of 2024, the data for Q1 have confirmed that the market is in the midst of the expansionary phase of the cycle, which has led us to revise upwards our forecast scenario.

In this article we briefly review the main factors that have led us to slightly revise the macroeconomic outlook for 2024 and 2025.

The Spanish economy has once again exceeded our expectations in the opening months of 2024. While the GDP growth figure for the final quarter of 2023 was higher than expected, that of the first quarter of this year confirms the good performance of Spain’s economy and leads us to revise our forecasts upwards. Let’s re-examine the main factors that will determine the outlook for Spain’s economy, after incorporating the latest available information.

Undoubtedly, the two key questions on investors’ minds and the central theme of the financial markets for much of the year – particularly in the last month – have been when the ECB and the Fed will lower interest rates and how many times they will do so in 2024. Thus, in May and early June the markets saw volatility in financial asset prices as investors sought clarity on the central banks’ future decisions.

The devastation caused by the floods could subtract between 10 and 20 basis points from Spain’s GDP in Q4 2024. This estimate is subject to a high degree of uncertainty and assumes a significant impact on Valencia’s primary sector, a moderate impact on its industry and a milder impact on trade. The estimate for 2025 will depend largely on the scale of the investments allocated to reconstruction and the replenishment of the capital destroyed in the floods, as well as on the support measures that are implemented.

According to the new estimate produced by the National Statistics Institute, GDP grew by 0.8% quarter-on-quarter
in Q1 2024, 0.1 pps more than originally estimated. Behind this good performance lie several key elements: the strength of the labour market, the boost provided by dynamic immigration flows and the good data for international tourism, which have once again exceeded expectations.

The Spanish economy is maintaining a good tone as 2024 draws to a close. The labour market is performing well despite the slight slowdown in November; inflation is picking up, driven by the most volatile components; the current account surplus continues to grow, and home sales are soaring.

The return from the summer break this year has been different to other years: the Spanish economy is where we left it, or even in slightly better shape than we had anticipated, and this will force us to revise our GDP growth forecast for 2024 slightly upwards.

In 2024, the global economy remained resilient in an environment marked by restrictive financial conditions and the major international economies managed to grow by more than expected. Nevertheless, 2025 is still set to be a challenging year: the threat of greater economic fragmentation has now been added to the risk map, with an increase in trade barriers and uncertainty.

For developed countries, we have data up until 2022, and in most of them income inequality continues to show a long-term upward trend. For Spain, however, we have data up until October 2024 and the message, fortunately, is quite different.

The economy continues to enjoy strong growth, with domestic demand acquiring a more prominent role, largely supported by the buoyancy of the labour market. Electricity keeps inflation at around 3%, while house sales buck the upward trend for the first time since 2024.

In 2024, all sectors of the Spanish economy have recorded growth, with only a few exceptions. In addition, the number of sectors in a situation of weakness has steadily declined, while that of sectors in expansion has increased. The outlook for 2025 is equally promising, although a slight moderation is anticipated in some cases.