Spain's Economy Exceeds Expectations in 2025, Faces Moderate Growth Outlook for 2026

Spain's economy displayed strong performance in 2025, achieving a GDP growth rate of 2.8%, surpassing the initial forecast of 2.3% and significantly outpacing the Eurozone's 1.5% growth. This robust expansion was primarily fueled by internal demand, with private consumption climbing by 1.0% and investment rising 2.2%, especially in construction and transportation equipment. The positive internal momentum countered external headwinds from increased imports, which rose by 1.4%, outpacing the 0.8% growth in exports.

Employment figures also improved markedly, with 76,200 new jobs created in the fourth quarter of 2025 alone—the best quarterly job gain in four years—bringing total employment to 22.46 million and reducing the unemployment rate to 9.9%, below the 10% threshold for the first time since 2008. Wage growth and high migration contributed to increased disposable income, which further supported private consumption.

Inflation moderated to 2.4% in January 2026, largely influenced by electricity prices, although core inflation remained relatively steady at 2.6%. The housing market continued to demonstrate strong demand, with sales up 7.8% year-on-year in November 2025, despite a slowdown in growth and ongoing pressure on prices driven by supply-demand imbalances.

Looking forward to 2026, early indicators suggest a moderation in economic growth. Social Security registrations have declined, and Purchasing Managers' Index (PMI) data signal slower activity. However, Spain's current account surplus remains healthy at 2.9% of GDP, buoyed by the strong performance of the services sector.

Overall, while the outlook for 2026 anticipates a slower pace compared to 2025's impressive results, Spain enters the year with an optimistic economic foundation underpinned by labor market strength, solid internal demand, and controlled inflation.