Published on Tuesday, December 26, 2023

Spain | Higher costs for businesses

Although energy and borrowing costs may be falling, businesses will have other challenges to contend with in 2024, including the risk of changes in labor regulation and taxation.

Key points

  • Key points:
  • The last few weeks have brought welcome news for the Spanish productive sector, in the form of lower fuel prices. At the domestic level, there is now more certainty about the direction electricity prices will take thanks to the steps taken by the Government, investment to improve energy efficiency, increased supply of renewables, and persistently high gas inventories.
  • If these lower energy costs take hold, GDP growth in Spain could be at least 0.5 pp higher than what the consensus view is currently expecting.
  • At present, almost 60% of goods and services are showing price increases of less than 2%. Reaching the 70% seen before the pandemic is an increasingly achievable goal in the short run.
  • With inflation now tumbling, the markets are already beginning to price in interest rate cuts as early as the first quarter of 2024.
  • Amid this environment, some of the measures included in the agreements that have led to the coalition government may push up the operating costs of companies, which could act as a counterweight. One example is the plan to reduce the number of hours worked per week.

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