Escrivá: Productivity, financing key for Spain's growth
Banco de España Governor José Luis Escrivá presented Chapter 3 of the Annual Report 2025 on July 9, 2026. He highlighted challenges in productivity, business growth, and the crucial role of financing in the Spanish economy.
Oil shock, then Spanish resilience
The year 2026 began with an unprecedented drop in global oil production due to the Middle East conflict, triggering a 42 percent price surge in two weeks.
While traffic in the Strait of Hormuz and oil prices have largely recovered, uncertainty remains high.
Despite this, the Spanish economy showed resilience in 2025, with GDP advancing 2.8 percent, significantly outperforming the Euro Area's 1.4 percent.
Growth was primarily driven by robust domestic demand, particularly durable goods consumption and investment, supported by improved financial conditions.
The external sector's contribution was negative (-0.7 percentage points).
A notable divergence in core inflation with the Euro Area intensified, reaching 3.5 percent in Spain by early 2026 compared to the Euro Area's 2.5 percent, largely due to persistent services inflation amid strong tourism demand.
The labor market remained solid, extending its path of intense job creation, though the unemployment rate reduction was slower, remaining 4 percentage points above the Euro Area average.
Spain's productivity turnaround
Total Factor Productivity (TFP) is a key driver for long-term growth.
Spain's TFP has improved significantly since 2013, reversing a prior divergence relative to the Euro Area.
Market share gains by more productive firms explain almost half of the aggregate productivity increase.
The link between business productivity and investment has strengthened post-2013, with TFP increases now boosting investment growth more effectively.
Average firm size has also grown, with large companies increasing their employment share.
Young firms demonstrate faster growth, tripling their size within five years.
This has led to a narrowed productivity gap with the Euro Area for large and medium-sized Spanish firms, though micro-SMEs still lag.
Financing fuels, but hurdles remain
Financing has played a crucial role, with corporate deleveraging and improved bank credit allocation to productive firms.
Alternative financing, like venture capital, has significantly boosted growth and innovation, especially for younger companies.
However, full convergence with the Euro Area faces hurdles from regulatory fragmentation, administrative coordination, and critical AI technology transfer.