European states are called to spend more and more in the face of the multiple challenges they face: demographic ageing, defence, reindustrialisation, climate change… Challenges that have a potentially harmful impact on public finances to which the CaixaBank Research analysis center has put the numbers. The organization estimates that if the adjustments that the bloc’s partners committed to in Brussels do not occur, the aggregate government deficit for the EU could widen in 10 years to 5% of GDP, from 3.2% last year. And while the debt/GDP ratio would jump by almost twenty points, approaching 100% of GDP in 2035, from 81% at the end of 2024.
The centre’s analysts prepared their projections based on the European Commission’s forecasts for different Member States and on information contained in their medium-term structural plans, designed within the new European fiscal framework. The corrective measures envisaged in them indicate an annual reduction of the structural primary deficit of around half a point of GDP between 2025 and 2031 (since some last four years and others seven), while for the debt rate they foresee a decrease of up to 25 points by 2035. “The implementation of medium-term plans is therefore fundamental to ensure the sustainability of public finances”, underlines the organization in its latest outlook document, published this year. Friday.
The forecasts for Spain remain stable: it will be the large European economy that will grow the most this year, +2.9%, well above the 1.3% of the Eurozone, showing solid dynamism despite the general economic slowdown. Analysts at the Center downplay the fact that external demand has reduced its contribution to GDP in recent quarters, in which private consumption and investments have taken over. “This negative contribution (of the foreign sector) should not be taken as a bad fact: Spanish exports have maintained very solid progress, we expect them to grow by 4.2% on an annual basis”, they underline.
The forecast for 2026 also remains unchanged, in which the economy would benefit from this year’s positive inertia. CaixaBank Research forecasts that GDP will increase by 2.1% next year, a percentage that is the result of the potential growth of the economy (1.6%) to which are added other positive factors such as European funds, which will end next year, the demographic boost that immigration is providing and the easing of interest rates and energy costs, among other elements.
However, there are risk factors, both for domestic and global business. The world is moving towards a new, more fragmented order, at the pace of trade war and geopolitical tensions; and new unknowns have appeared on the horizon, such as the future of artificial intelligence. Nonetheless, global GDP is holding up and will increase by 3.1% both this year and next, according to estimates from CaixaBank Research, data which reveal that the economy is resisting the high uncertainty that characterizes the current context better than expected. “The risk lies in underestimating the changes and thinking that we will return to the same way status quo above,” the document warns.
