Banco de España Raises Spain's GDP Growth Forecast to 2.9% for 2025 and 2.2% for 2026
Banco de España upgrades Spain's GDP growth forecasts for 2025 and 2026, citing strong private consumption and exports despite inflation and external risks.
- • Banco de España raised GDP growth forecasts to 2.9% for 2025 and 2.2% for 2026.
- • Growth driven by strong private consumption, increased exports in non-tourism services, and improved household income.
- • Inflation projected at 2.7% for 2025, above ECB targets, with moderation expected thereafter.
- • Unemployment forecast to fall below 10% by 2027, but wage increases may challenge competitiveness.
Key details
The Banco de España has revised upward its economic growth projections for Spain, forecasting a GDP increase of 2.9% for 2025, followed by a 2.2% expansion in 2026 and 1.9% in 2027. This upgrade aligns with government estimates and reflects stronger-than-expected economic activity primarily driven by robust private consumption, increased household income, and export growth in non-tourism services.
The optimistic outlook is anchored in improved data from the second and third quarters of 2025, which alleviated previous uncertainties. Governor José Luis Escrivá attributed the forecast revision to healthier national accounts and greater consumer confidence. Meanwhile, David López Salido, the Bank's chief economist, highlighted the easing of commercial uncertainties due to tariff agreements and applauded Spain's resilience against global trade tensions.
Despite this positive momentum, the Banco de España anticipates a gradual moderation of growth toward the economy’s potential rate of roughly 2%, with some caution advised due to risks related to external demand fluctuations and wage pressures that could affect competitiveness. Inflation is now expected to average 2.7% in 2025—above the European Central Bank's target—with a moderation to 2.1% in 2026 and 1.9% in 2027. Employment growth is projected to slow, and the unemployment rate is forecasted to decline steadily, reaching below 10% by 2027 for the first time since 2008.
The public deficit is projected to fall to 2.1% by 2026 but may rise again to 2.5% in 2027 due to public sector wage increases, which are expected to outpace inflation. Salido explained that collective wage agreements and a minimum 4% salary increase for public employees could raise labor costs. Nevertheless, companies are anticipated to absorb some cost increases without significantly dampening investment or sparking price inflation.
The construction sector shows mixed signals: while demand remains strong, new housing projects are moderating. Geopolitical risks have somewhat eased, though volatility in stock markets, particularly in the technology sector, persists as a potential concern.
Overall, the Banco de España's updated projections convey a cautiously optimistic outlook for the Spanish economy, reflecting stronger domestic demand and solid fundamentals, but also highlighting the importance of carefully managing inflationary pressures and external risks in the coming years.
This article was synthesized and translated from native language sources to provide English-speaking readers with local perspectives.
