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Spain has made significant progress in reducing greenhouse gas emissions alongside continued economic growth. However, this process has been uneven: emissions remain concentrated in a limited number of economic sectors, and the pace of decarbonization varies considerably across regions.

Since the pandemic, Spain’s labour force participation rate has risen by 1.6 percentage points, reaching 59% of the working-age population in 2025. While the underlying trend is structural, most of the increase since 2020 reflects cyclical factors.

Spain is experiencing record employment growth that contrasts with the stagnation of wage purchasing power. This situation is explained by an economic model based on the accumulation of jobs rather than improvements in productivity, compounded by a higher tax burden on labor.

The observatory analyzes the cyclical evolution of the Spanish economy and housing prices in 2025. GDP closed the year with solid growth (2.8%), supported by domestic demand (contributed 3.6 pp to growth), while the labor market remained strong. The rise in the relative price of housing stands out in the current cycle.

Headline inflation in Spain accelerated to 3.4% YoY in March, driven by energy and, to a lesser extent, by services and industrial goods. In fact, core inflation rose unexpectedly to 2.9%. BBVA Research estimates that headline inflation could rise to 3.6% or 3.7% in April.

Spain faces the challenge of consolidating its public accounts without compromising potential growth. Public investment acts as a key production factor for productivity, but its persistent decline following the financial crisis and current pressure from current expenditure pose risks to European convergence.

In this publication you will find, on a weekly basis, our selection of the most relevant news regarding financial regulation.