Spain's economy resilient, faces housing and productivity hurdles
Banco de España's Director General de Economía, David López Salido, presented the Annual Report 2025 on June 18, 2026. The report highlights Spain's economic resilience amidst global turbulence, while identifying key challenges in the housing market and productivity.
Geopolitical shocks test global economy
The year 2025 and early 2026 saw significant global turbulence, including new US tariffs, a partial US government shutdown, and a US-Israel conflict with Iran that closed the Strait of Hormuz, causing a 42 percent oil price surge.
Despite this, the global economy showed resilience in 2025, with global GDP growing 3.4 percent.
Spain's economy grew 2.8 percent in 2025, outpacing the Euro area's 1.4 percent, primarily driven by strong internal demand.
However, Eurosystem forecasts for June 2026 imply higher inflation and slightly lower growth for the Euro area, leading the ECB to raise rates by 25 basis points in June 2026 to contain inflationary pressures.
Spain's inflation gap persists
Spain's 2.8 percent GDP growth in 2025 was supported by factors like a higher share of renewables, tourism desesonalization, and migration-driven labor supply.
However, the report notes a widening inflation differential with the Euro area, particularly in core inflation due to persistent services prices amid strong tourism demand.
While wage growth aligns with European trends and the labor market remains robust with falling unemployment, public debt continues to exceed pre-pandemic levels.
Updated macroeconomic projections for June 2026 maintain dynamic growth for Spain but anticipate increased inflation.
Housing crunch, productivity drag
The report critically assesses Spain's housing market, where prices are accelerating due to strong demand and severe supply restrictions, leading to significant access problems and a cumulative deficit of 750,000 homes since 2021.
This structural imbalance, alongside persistent challenges in productivity and business growth, poses a substantial long-term risk to Spain's economic potential.
Addressing these supply-side issues is crucial for sustainable and inclusive growth, requiring comprehensive policy interventions beyond short-term fixes.