At the end of April, the government submitted to the European Commission the 2026 Annual Progress Report (APR), the document which tracks progress against the 2025-2028 fiscal and structural plan to which it committed with Brussels. In this article, we analyse the state of the public finances based on the report.
All the indicators were suggesting that the growth of the Spanish economy was still strong, yet the latest GDP figure published by the National Statistics Institute has exceeded even the most optimistic expectations: the figure reveals a buoyant economy, especially taking into account the context in which it has occurred.
News related to the supply problems (or bottlenecks) within global value chains have been a permanent fixture of recent months. The temporary shutdown of some car plants due to the lack of chips and difficulties in the Black Friday or Christmas campaigns due to delays in the arrival of shipping containers are some of the best known examples. In this article, we analyse what is causing these problems and, looking ahead to 2022, how long they could last.
In 2021, inflation has reached levels not seen for many years in most economies. This phenomenon is dominating the current economic debate, mainly because of its implications for monetary policy. Our view, which is shared by the major central banks, is that the factors behind these high inflation rates are transitory in nature and should fade during the course of 2022.
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.
September has been a month of transition in the financial markets, characterised by increased volatility and significant movements in risk assets. Monetary policy decisions, especially the US Federal Reserve’s meeting, has set the tone for the month, together with the process of adapting to the new trade context amid higher tariffs.
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 CBO’s report published in June reveals that, in the absence of any substantial changes in fiscal policy, the US’ public accounts are set to deteriorate significantly over the coming decade: by 2034 the deficit would represent 7% of GDP, well above the historical level of 3.7%, while public debt would continue to climb to new highs, reaching 122% of GDP.
The retirement of a generation as numerous as the baby boomers will result in the relative growth of the senior population in the coming decades, and this will have significant consequences for how our societies and economies are structured. We analyse the impact and estimate the cost of the ageing of the population in Spain.
Geopolitical instability complicates the macroeconomic scenario, while economic activity indicators point to dynamic growth in Q1. Where the impact of the conflict in the Middle East and the government's measures is most evident is in the rise in inflation. The reduction of the budget deficit in recent years helps to face the new shock, and the relatively low levels of indebtedness is another distinguishing factor compared to previous crises. Employment remained robust in March.
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.
Broadly speaking, there are three key factors which define the new macroeconomic picture of the Spanish economy that we have elaborated here at CaixaBank Research, and which are shared by most of the institutions that have updated their forecasts.
Despite the goal to reduce the government deficit to 3% of GDP in 2024, the Treasury’s funding needs will remain high. In addition, the market will have to absorb all the debt that is currently in the hands of the ECB and which it will not reinvest. In this context, we provide some perspective on the volume of debt that the market will have to absorb during this year.
The outbreak of war between Russia and Ukraine requires a revision of the outlook for the Spanish economy, despite the high uncertainty surrounding the scope and duration of the impact.
The rise of AI has led to hopes of a new industrial revolution and, at the same time, fears of another bubble. This ambivalence extends to stock market valuations: they rest on expectations of vast revenue growth, but at the same time, there are doubts about their sustainability, either because the expectations themselves may disappoint or due to the eye-watering spending and investment plans being drawn up by firms in the sector.
The Spanish economy has held up better than expected in a complex and globally adverse environment during the first half of the year. Nevertheless, the indicators available for the second half of the year show a change of tone and the pace of growth is beginning to weaken.
Pedro Álvarez is an economist in the Spanish Economics department. With a Master’s degree in Applied Economics from the University of Oviedo, after specialising in the study of financial crises and early warning systems he began his career at the Inter-American Development Bank in the USA. Prior to joining CaixaBank Research he had accumulated more than fifteen years of experience in analysing the economic outlook in other financial institutions. Currently, his areas of research include macroeconomic analysis of the Spanish economy, with a particular emphasis on sectoral analysis.
Today’s economic headlines are focusing on the devastating economic impact that the COVID-19 crisis is having on the labour market, businesses and households, and on the steps being taken by more than half the world’s governments and central banks to mitigate these effects. However, when everything passes, the changes that the current crisis is triggering more quietly and discreetly in many other aspects will become apparent. In this article, we focus on the changes that are likely to occur in the way we produce.
With the general government deficit expected to stabilise at around 4.0% of GDP in 2023, the Treasury’s funding needs will remain high. The market will also have to absorb all of the debt held by the ECB that will not be reinvested by the central bank, after it announced a shift in its strategy in December. In this context, it is useful to put into perspective the volume of debt that the market will have to absorb during 2023.
With the worst of the pandemic behind us, how is consumption recovering? Are there significant differences between the various groups of the population?