Spain economy set to grow 2.7% in 2025, buoyed by private consumption, central bank says

The Bank of Spain said on Tuesday that it expects the country’s economy to expand by a strong 2.7% this year, up from the 2.5% forecast in its previous quarterly update, thanks to soaring private consumption, in contrast with the rest of the euro zone.

The bank attributed the increase to recent growth data published at the end of January and the positive impact higher household income will have on consumption. The government’s forecast is for 2.6% growth.

The growth this year will be slower then the 3.2% registered last year, but contrasts with the rest of the euro zone’s large economies such as France, Germany and Italy, which are all expecting growth rates below or close to 1%.

Recent geopolitical tensions represent a risk for the Spanish economy, the central bank said in its report, adding that its forecast had not measured any effect these tensions may have on economic activity.

Bank of Spain chief economist Angel Gavilan told a press briefing that for now he did not see a scenario of recession in the United States, though added that if any risks materialized “the impact would not be negligible on global GDP or on the Spanish economy.”

The central bank maintained its growth forecasts for 2026 and 2027 unchanged at 1.9% and 1.7% respectively, and added that it expects quarterly growth in the first quarter of between 0.6% and 0.7%.

Unemployment rates would continue to decline over the 2025-2027 horizon though at slower pace than in 2024 in a context of lower job creation and deceleration in population growth, such as migration, one its growth drivers.

Spain’s EU-harmonised consumer inflation should rise to 2.5% this year from previous guidance of 2.1%, mainly due to higher energy prices seen at the beginning of the year.

It maintained its outlook for inflation at 1.7% and at 2.4% for 2026 and 2027.

Source : Reuters