Spain's economy resilient amid global turbulence, productivity key
Banco de España Director General David López Salido presented the Annual Report 2025, highlighting Spain's robust economic growth in 2025 despite global turbulence from tariffs and an oil shock. The report emphasizes ongoing challenges in productivity and housing market access.
Global headwinds, Spanish resilience
The global economy faced significant turbulence in 2025-2026, marked by US tariff volatility and the US-Israel conflict against Iran.
The latter led to the closure of the Strait of Ormuz, causing an unprecedented 12 percent drop in global oil production and a 42 percent surge in Brent crude prices within two weeks.
Despite these external shocks, Spain's economy showed resilience, with GDP growing 2.8 percent in 2025, outpacing the Euro Area's 1.4 percent.
This growth was supported by lower energy prices, dynamic tourism, and robust labor supply.
However, Spain's headline inflation rose to 2.3 percent in November 2025, widening its differential with the Euro Area due to persistent services inflation.
Public debt remained elevated at 97.7 percent of GDP.
The labor market continued its strong performance, reducing unemployment, though employment growth in Catalonia showed less dynamism.
Unlocking growth through productivity
Total Factor Productivity (TFP) is identified as the main long-term driver of growth, with Spain showing TFP improvement since 2013, narrowing the gap with the Euro Area.
The link between business productivity and investment has intensified, with more productive firms investing more.
The report notes increased business size and faster growth among young firms, which now triple their size within five years.
Financing has played a crucial role, with corporate deleveraging strengthening financial positions.
Bank credit allocation has improved, becoming more linked to firm productivity, particularly for younger companies.
Alternative financing, such as venture capital, has also reinforced funding for productive businesses, fostering growth and innovation.
Resilience tested, future shaped
The report underscores Spain's ability to navigate significant external shocks, demonstrating underlying economic strength.
However, the persistent inflation differential and the critical need for productivity gains highlight structural challenges that require sustained policy focus.
The emphasis on financing and business dynamics suggests a strategic shift towards supply-side reforms for long-term sustainable growth.