De Guindos: “Risks shifting from high inflation to low growth.”

Brussels – “The disinflation process is well on track,” but this is only seemingly good news. Why? European Central Bank Vice President Luis De Guindos explains that for every knot untied, new ones emerge. “The balance of macroeconomic risks has shifted from concerns about high inflation to concerns about low growth,” he warns from Madrid at the 15th edition of Spain Investors Day.

“The outlook is clouded by even higher uncertainty, driven by potential global trade frictions, macroeconomic fragmentation, geopolitical tensions, and fiscal policy concerns in the euro area,” De Guindos said. The ECB vice-president shares with the audience the data available to the Eurotower, which is far from encouraging. “The latest information suggests that the economy is losing momentum,” he acknowledges.

Specifically, manufacturing output is still contracting, and in services, growth is slowing due to persistently high energy prices. In this regard, it should not be forgotten how the ECB is starting to look at gas cost trends with renewed concern. Moreover, companies are holding back on investments, and exports remain weak, with some European industries struggling to stay competitive. This picture shows an economic and productive trend that remains bleak.

What about the immediate future? “Provided trade tensions do not escalate, growth is projected to be just above 1% in 2025 and to move slightly up to modest levels in 2026 and 2027,” De Guindos said: a less-than-stellar performance, which could also be lower and turn into low growth.

Trade tensions with China, possible tensions with the United States, the Russian-Ukrainian conflict, instability in the Middle East, and, on top of that, the budget laws of Austria, Belgium, and Spain that still have to be submitted in Brussels complicate the coordination of spending policies: these are the downside factors, explains De Guindos. Who warns, “This environment of very high uncertainty could dent confidence and dampen the recovery in consumption and investment.”