The Bank of Spain has just revised downward its growth forecast for the Spanish economy by three-tenths of a percentage point, to 2.4%. It has also lowered its forecast for next year by one-tenth of a percentage point, to 1.8%. Its baseline scenario is one of moderate growth, although subject to high uncertainties in the global environment.
It is true that international uncertainty is currently high: from a geopolitical perspective, at the trade level, and also due to divergences in monetary policy management among the major economies. These are different threats that logically motivate more moderate behavior in the future of external demand. However, domestic demand data remain solid.
This is due to the sound financial position of households and businesses. Their debt has continued to decline in recent months, reaching 107.2% of GDP, the lowest level since the financial crisis. And below the European average.
The financing capacity of the Spanish economy stood at 3.9% of GDP in February, the highest figure in the last decade. Since the financial crisis, it has become common for the deleveraging process of households and businesses to be compatible with higher economic growth. Growth that is more solid than in the past, recently underpinned by consumer behavior and business investment.
With positive employment figures and rising disposable income, under favorable financial conditions, it is reasonable to expect private consumption to continue being the engine of growth in the short term. It is also sensible to expect investment to continue rising, supported by European funds, construction, and investment in production capacity by businesses.
The strength of banks, with high solvency, liquidity, and profitability, is also a confidence factor in these times of uncertainty. The best example is the double-digit increase in new financing to households and businesses at interest rates well below the European average.
However, seeing the glass half full for the coming months does not mean overlooking the challenges facing the Spanish economy in the future, especially in the case of business investment and public finances.
On the one hand, business surveys agree on the need to promote training better adapted to labor demand and foster talent. Training is one of society’s most valuable assets, because it translates into innovation and growth. In addition, businesses also call for reducing bureaucracy and lowering production costs, including taxes.
On the other hand, the IMF published a few days ago the 2025 Article IV Report on Spain, focusing part of its conclusions on the need to continue adjusting public finances. Specifically, “to leverage the growth momentum to more rapidly rebuild fiscal space and reduce sovereign debt risks through a clearer consolidation strategy.” Public debt has moderated this year to 103.5% of GDP, although it has continued to reach new highs in absolute terms.
In this scenario, we must also consider the World Bank’s downward revision of the forecast growth for the eurozone, which has almost coincided with the Bank of Spain’s projections.
The supranational institution has lowered growth for the euro area this year by three-tenths of a percentage point to 0.7% and by four-tenths for 2026 to 0.8%. The increase in defense spending, especially in Germany, will not be able to offset the expected weakness in global trade.
Here the glass is half empty, with the keys we all know to improve the medium- and long-term outlook. Europe needs to be more competitive, solutions to successfully address the challenges of decarbonization, innovation, and economic security, but also to maintain the welfare state. More European integration and structural reforms to make it viable. The continued filling of the Spanish economy’s glass at a good pace will also depend on this.
Jose Luis Martínez Campuzano, spokesperson for the Spanish Banking Association
