Spain’s Economic Outlook: Growth Forecasts and Fiscal Challenges
Spain’s economy is projected to maintain a robust growth trajectory, outpacing much of the Eurozone, according to a recent report by the autonomous financial entity BFF.The report offers a detailed analysis of Spain’s economic performance, forecasts, and potential challenges.
GDP Growth: A Positive Outlook
BFF maintains a growth forecast of 2.5% for Spain’s GDP in 2025, aligning with estimates from the International Monetary Fund (IMF). This figure is triple the average growth rate projected for the Eurozone, which stands at 0.8%.
Looking ahead to 2026, the study projects a growth rate of 1.8% for the Spanish economy, despite a global context marked by the uncertainty derived from the commercial tensions promoted by the United States.
- 2025 GDP Growth Forecast: 2.5%
- 2026 GDP Growth Forecast: 1.8%
According to BFF, Spain stands out as one of the few advanced economies that has avoided downward revisions by the IMF. This is attributed to the strength of private consumption,good behavior of the labor market and the dynamism of investment.
In addition, the transition to a growth model based on domestic demand is consolidated, where private consumption and business investment play a basic role in sustaining economic dynamism.BFF Report
Labor Market and Immigration
Spain’s labor market continues to exhibit dynamism, with widespread job creation across moast age groups, with the exception of the 35 to 44 age range. Immigration plays a notable role in driving the active population, contributing to economic growth without causing significant inflationary pressures.
Public Deficit and Debt Management
The analysis projects a public deficit of 2.7% of GDP by 2025, a decrease of 0.5 percentage points from 2024, excluding exceptional effects from events like the DANA storm and other extraordinary measures.
This enhancement is attributed to:
- The gradual withdrawal of aid related to the energy crisis.
- the implementation of new income measures.
- Controlled public spending.
The debt-to-GDP ratio is expected to continue it’s decline, reaching 100.8% this year, a point below the 2024 closure. The accumulated reduction from the peak in 2021 amounts to 22.4 percentage points, reflecting a sustained consolidation process.
However,the report cautions that without structural reforms,this improvement could be reversed in the medium term.
Regional debt has exceeded €335 billion, an increase of €10.736 billion in the year. In relative terms, the debt-to-GDP ratio experienced a reduction of 0.6 percentage points due to strong nominal growth, settling at 21.1% of GDP.
The regional deficit could see a slight deterioration
to 0.5% of GDP (or 0.4% excluding the impact of DANA), primarily due to the normalization of income growth after the exceptional
increase in 2024. A reduction in the regional debt ratio to 19.8% of GDP is anticipated in 2025, marking a 1.3-point decrease from the previous year.
Regional disparities persist, with Navarra, the Canary Islands, Basque country, Madrid, and Asturias expected to maintain debt levels below 13%, while murcia and the Valencian Community will remain above 30%.
Catalonia and Castilla-La Mancha are projected to reduce their debt to slightly below 30% of their regional GDP, moving out of the highest debt group.
Second semester Forecasts
The evolution of the Spanish economy in the second half of 2025 will be influenced by global commercial policy, central bank decisions, and the implementation of fiscal support measures in Europe.
Key factors include:
- trade Tensions: Tariff escalations driven by the United States have raised uncertainty
at levels not seen from the pandemic,
posing risks to global growth and international trade, whichcould affect an economy as open as Spanish.
- Monetary Policy: The European Central Bank is expected to continue easing its monetary policy due to moderating inflation, while the Federal Reserve is likely to maintain high interest rates, reflecting caution about potential decelerations in the United States.
If the commercial uncertainty is moderated and a recession is avoided in the US, global growth could stabilize in 2026, which would benefit the Spanish economy.Or else, geopolitical and commercial tensions will continue to ballast global economic activity,
the study notes.
Investment and defense programs in Europe,such as the ‘Europe Plan’ and the German investment plan,could help mitigate the impact of these risks and support economic recovery.
