MADRID (Reuters) – The Spanish government on Monday lowered its gross domestic product (GDP) growth forecast for 2024 but raised that for 2023, stressing that the economy has proven more “dynamic” than expected since the start of the year.

In the new budget forecasts sent to the European Commission, Spain now expects GDP growth of 2.4% in 2023, compared to 2.1% previously, according to a press release published by the Ministry of the Economy.

“Looking back, growth in 2023 has exceeded all the forecasts we made a year ago,” interim Deputy Economy Minister Gonzalo Garcia Andres told reporters on Monday.

He highlighted that strong domestic demand and funds provided by the European Union as part of support for the economy following the COVID-19 pandemic were having a positive impact.

However, growth is expected to slow next year, to 2%, due in particular to geopolitical conflicts in the world. The previous forecast expected GDP growth of 2.4%.

“The assumptions are very conservative,” said Gonzalo Garcia Andres. “They reflect a scenario marked by volatility and pressures on energy prices,” he added.

These new forecasts only take into account current government measures decided as part of the budget, he noted.

Since the legislative elections in July, the result of which failed to produce a clear majority, Spain has been led by an interim government which cannot vote for a new budget. Outgoing government President Pedro Sanchez is seeking a second term in a parliamentary vote scheduled for late November and Spain will likely have to roll over the current budget from January on a monthly basis until confirmation of a new government. New legislative elections also remain possible.

The government also updated its forecast for the debt-to-GDP ratio, which should reach 108.1% at the end of the year, whereas until now it had forecast a ratio “below 110%”. In 2024, this ratio could return to 106.3%.

The forecasts for the budget deficit have remained unchanged, at 3.9% of GDP for 2023 and 3% for 2024, shows the ministry document.

Spain’s statistics agency last month revised upwards the growth recorded in 2021 and 2022 after compiling final data for the period, leading the government to reduce its debt-to-GDP ratio.

The Bank of Spain, for its part, forecasts growth of 2.3%-2.5% this year and 1.8% in 2024, while the International Monetary Fund (IMF) recently raised its GDP forecast for 2023 by 0.2 percentage points, to 2.5%.

(Reporting Inti Landauro and Belen Carreno; Claude Chendjou, edited by Kate Entringer)

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