Deviations of economic forecasts for 2024 twice as large as in 2023

The  ‘Diana Esade’,  which analyses the accuracy of economic forecasts made by the entities on the Funcas panel, reveals that in 2024 deviations were greater than in 2023, particularly as regards GDP growth. In 2023 the difference between average forecasts (2%) and actual growth (2.7%) was 0.7 percentage points, whilst the deviation in 2024 was twice as large i.e. 1.4 percentage points (forecast of 1.8% compared to the actual figure of 3.2%).

“Spain’s economic growth has exceeded the forecasts made by most entities, with the job market climbing to a record 21.85 million persons in employment, thanks partly to the influx of migrants,” explained Omar Rachedi, professor of Economics at Esade and co-author of the report, along with André B.M. Souza, professor of Economics at Esade. Rachedi explained that “unemployment fell to 11% and inflation was lower than forecast, against a backdrop of monetary expansion in which the European Central Bank (ECB) reduced interest rates by 75 basis points.” “We still don’t really understand the reasons for this extended economic strength,” said Souza. “Given the landscape of low growth across the EU, this improvement doesn’t seem to stem from external factors, but rather from a bolstering of Spain’s relative position.”

Deviations of economic forecasts

As for GDP growth in 2024, the CEPREDE–UAM (Madrid University’s economic forecast center) and the Spanish Government both forecast 2.4%, making them the entities whose forecast was closest to actual GDP growth (3.2%), whilst the average of all entities (1.8%) was 1.4 points away from said GDP figure.

The Esade Diana Economic Analysis, which analyzes the degree of deviation over the last three years (2022, 2023 and 2024), also reveals CEPREDE-UAM and the Bank of Spain to be the entities with the smallest average error (both with a deviation of 0.5 percentage points), followed by the Spanish Government, the Loyola University of Andalusia and the OECD (all three with 0.6).

This year, the report features the Esade Diana Penalized Analysis which measures the mean squared deviation of 3-year forecasts. According to this metric, the forecasts of CEPREDE-UAM and the Bank of Spain continue to be the most accurate (with deviations of 0.6 and 0.62 points, respectively). Besides this, the addition of the Directional Bias analysis made it possible to identify any forecasts systematically skewed towards optimism or pessimism: the Bank of Spain, CEEM-URJC, the European Commission, Equipo Economico, EthiFinance Renting, Intermoney and Repsol made the most neutral growth forecasts.

Analysis of inflation forecasts

As regards inflation, the Spanish Chamber of Commerce, CEOE, ICAE-UCM and Repsol all accurately forecast 2.8% for 2024. However, the average deviation was larger than in 2023, ranging from 0.2 points (3.5% forecast as opposed to the actual figure of 3.7%) to 0.3 points in 2024 (3.1% forecast and actual figure of 2.8%).

“Inflation remains above the ECB target and the combination of monetary easing with a gradual deceleration in inflation explains why several entities expected a greater upturn in prices,” said Rachedi. He also commented that “the robust performance of GDP and the moderation of prices reveal that the negative supply factors that ensued in the wake of the post-COVID inflationary crisis are disappearing. Price moderation might also be related to improved productivity, which has grown faster than over the last decade. This is positive because the lackluster growth in productivity has historically been the Achilles’ heel of the Spanish economy,” he pointed out.

The 2024 figures, analyzed in conjunction with those of the two previous years, which comprise the Esade Diana Inflation Analysis, reveal that ICAE-UCM, CEPREDE–UAM, Mapfre Economics and the European Commission are the entities whose forecasts had the smallest simple mean deviation (2 points for the first entity’s forecast and 2.4 for the other three’s). In the Esade Diana Penalized Inflation Analysis, the entities with the most accurate forecasts over the last three years were ICAE-UCM (0.67), the European Commission (0.87) and CEOE (0.83). As regards Directional Bias, most institutions overestimated inflation, except for Mapfre Economics (neutral) and CEOE, ICAE-UCM and the Loyola University of Andalusia, which tended to underestimate it.

Deviations of employment forecasts

As regards unemployment in 2024, the Loyola University of Andalusia accurately forecast an unemployment rate of 11.4%, followed by Repsol (11.3%) and the Bank of Spain (11.5%). The average deviation was 0.5 points, smaller than in 2023 (0.8 points).

In the 3-year analysis covered by the Esade Diana Employment Analysis, the Loyola University of Andalusia (0.53), the Spanish Government (0.57) and CaixaBank (0.61) were the most accurate, whilst according to the Esade Diana Penalized Analysis, the most accurate were CaixaBank (0.66), the Spanish Government (0.69) and the Loyola University of Andalusia (0.8). As for the Directional Bias analysis of employment, most entities overestimated the rate of unemployment in recent years, except for the Government which was more accurate.

“Inflation and unemployment forecasts have been exceptionally accurate, recording the smallest deviations of the last five years,” said Andre B.M. Souza. “This accuracy suggests that, after a highly volatile period, uncertainty regarding pricing and the dynamics of the job market have fallen considerably.” Omar Rachedi added that “consumer spending, which was sluggish between 2021 and 2023, also experienced an upturn in 2024, with an increase in the purchase of durable goods reflecting greater economic confidence.” “However, geopolitical risks could result in more