Funcas raises its GDP projection for 2025 to 2.4% but warns about the external sector.

The Funcas Panel has updated its economic forecasts and raised the GDP projection for 2025 to 2.4%. However, this optimism is accompanied by warnings about the external sector, which could face significant challenges in the near future. The new estimates from experts are slightly below those projected by the Bank of Spain and AIReF, but exceed the projections from international organizations such as the European Commission and the OECD. According to the projections presented, a GDP growth of 0.6% is anticipated in the first quarter of 2024, followed by increases of 0.5% in each of the remaining quarters. This growth will be primarily driven by domestic demand, which will contribute 2.5 points to GDP. This figure represents an increase of two-tenths compared to previous forecasts. However, the external sector, which has traditionally been a growth engine, is expected to detract one-tenth from this figure, highlighting the fragility of the current situation. The economic slowdown compared to 2024 will be more pronounced in consumption, which will be particularly affected in the public sector. The projection indicates that the growth of imports will surpass that of exports, which could lead to a deterioration in the trade balance and further complicate the situation in the external sector. In contrast to the weakness in consumption, investment is expected to show more vigorous growth, especially in key areas such as machinery and equipment. This change is notable in relation to the weak growth anticipated for 2024, which could indicate a possible recovery in business confidence and a commitment to modernizing productive infrastructure. The Funcas Panel report also highlights that, in terms of inflation, the forecast for the average general rate for 2025 has been adjusted upward to 2.2%. This implies an annual rate in December that is expected to be 2.1%. In the case of core inflation, the projection has also increased to 2.3%, suggesting that inflationary pressure could persist in the future. Another important aspect mentioned in the report is the unemployment rate, which is projected to be 11.1% in 2025, representing an improvement from the 11.5% anticipated for 2024. Although this decrease is positive, it serves as a reminder that the European labor market faces significant challenges on the path to economic recovery. Analysts' consensus has also revised public deficit forecasts upward, which is expected to be 3.2% of GDP for 2024 and 3% for 2025. These figures exceed the government's expectations, which could further complicate fiscal management in an environment of increasing economic pressure. On the international front, panelists maintain a pessimistic outlook, especially regarding the European Union. There is a notable differential in growth and interest rates between the eurozone and the United States, where the American economy continues to show signs of robustness. This situation, along with inflationary pressure in the U.S., contrasts with the disinflation projected for Europe, which could exacerbate economic disparities between the two regions. The weakness of the euro has become a critical factor, and analysts do not foresee a recovery in the short term. This could force the European Central Bank (ECB) to adopt a more gradual approach in its monetary policies. Despite this context, the ECB is expected to make interest rate cuts of around 75 basis points before the end of the year, which could help alleviate pressure on the European economy. Finally, the rise of the one-year Euribor, which has surged since early December to nearly 2.6%, is a clear indicator of tensions in the financial market. This rate is expected to decrease by only about 35 basis points by the end of the year, suggesting a still elevated interest rate environment that could limit investment and consumption capacity in the short term.