Spain raises GDP growth target and unemployment at lowest since 2008

The Spanish Economy Ministry is set on Tuesday to raise its gross domestic product growth target for this year above the current 2.4 per cent, Economy Minister Carlos Cuerpo said, in stark contrast with growth in other large Eurozone economies.

Cuerpo said he would announce a revision of the government growth forecast above 2.5 per cent, after the economy expanded around 0.7 per cent-0.8 per cent in the fourth quarter, he told radio station SER late on Monday in an interview.

“Let me have a small margin for surprise, but we will update. We were sincerely below 2.5 per cent and we will update upwards,” he said.

The Spanish statistics department is due to release GDP growth data for the fourth quarter on Wednesday.

The strength of Spain’s economy contrasts with other large economies in the Eurozone.

In recent days, France and Germany have lowered their GDP growth targets for this year to 0.9 per cent and 0.3 per cent respectively, while Italy expects 1.2 per cent growth.

GDP in the 20 countries sharing the euro grew by 0.4 per cent in the third quarter from the previous three months, half the pace of Spanish growth, Eurostat data showed last month.

Meanwhile Spain’s unemployment rate in the fourth quarter fell to its lowest in more than 16 years, data from the National Statistics Institute showed on Tuesday, as the economy outperforms its neighbours.

The unemployment rate fell to 10.61 per cent, down from 11.21 per cent in the previous quarter and the lowest level since the second quarter of 2008, when it stood at 10.36 per cent, said INE.

Economists polled by Reuters had forecast Spain’s unemployment rate would fall to 11.10 per cent.

Spain added 468,000 net jobs in the year. More than 90 per cent of these were in services, INE said, as the tourism industry boomed.

The Economy Ministry is set on Tuesday to raise its gross domestic product growth target for this year above 2.5 per cent, Economy Minister Carlos Cuerpo said on Monday, in stark contrast with weak growth in other large Eurozone economies. France and Germany have recently lowered their growth forecasts.

Meanwhile energy costs lifted Spanish manufacturing prices in 2024 following a contraction in the previous year, the National Statistics Institute (INE) said. Manufacturing prices rose 2.3 per cent last year after a 6.3 per cent decline in the previous year, when energy prices fell from a peak in 2022 prompted by the war in Ukraine, INE said in its monthly report.

Prices of oil, gas and electricity rose 7.5 per cent in Spain in 2024 after contracting by 20.6 per cent in 2023, INE said.

Following turmoil on energy markets in 2021 and 2022 caused by the COVID pandemic and then the start of the Ukraine war, industrial price growth in Spain peaked at 47 per cent in March 2022. Companies tend to pass on industrial price rises to customers, ultimately fuelling inflation.

Spain’s annual inflation rate has picked up in recent months, reaching 2.8 per cent in December after having eased to 1.5 per cent in September.

Industrial prices rose 0.9 per cent in December from November and INE revised up the year-on-year November price increase to 1.2 per cent from an initial 0.9 per cent increase.

Meanwhile Spain ended 2024 with 2.56 million people unemployed, the fewest in December since 2007, the Labour Ministry said on Friday on its website.

The number of people in Spain registering as jobless fell 0.98 per cent in December from a month earlier, or by 25,300 people, the ministry said. The number was 5.4 per cent lower than in December 2023, but above the 2.13 million registered without a job in December 2007.

Meanwhile Spain plans to raise taxes on holiday rentals so that they pay “like a business”, Prime Minister Pedro Sanchez said on Monday, as residents of the country’s main cities grapple with soaring rents.

“It isn’t fair that those who have three, four or five apartments as short-term rentals pay less tax than hotels or workers,” Sanchez told an event on affordable housing in Madrid.

Housing has become a major issue in Spain as it struggles to balance promoting tourism, a key driver of its economy, and concerns over high rents due to gentrification and landlords shifting to more lucrative, short-term tourist rentals. Sanchez also promised tougher measures to combat fraud around such rentals, without going into details. Last month, authorities opened an investigation into Airbnb for failing to delete thousands of misleading rental offers from its platform.

Meanwhile Spain ended 2024 with 2.56 million people unemployed, the fewest in December since 2007, the Labour Ministry said on Friday on its website.