Spain | Between global uncertainty and domestic stimulus

Summary

BBVA Research’s forecasts released this past week point to slight changes in GDP growth expectations, despite the fact that the economy has been exposed to significant shocks.

Key points

• Key points:
• GDP growth could reach around 2.5% in 2025 and 1.7% in 2026. The expected slowdown moving forward will be partly determined by the change in U.S. trade policy.
• Contrary to what was predicted a few months ago, fiscal policy in the euro area and in Spain will be expansionary. The first milestone in this respect is the agreement reached to raise defense spending in Europe to at least 2% of GDP.
• There is a risk that, in the short term, domestic productive capacity will fall short in meeting the demand for specialized goods and services, leading to an increase in imports.
• Fiscal policy had already begun to change its tone at the start of the year due to the aid handed out to individuals, companies and local government bodies affected by the November flash floods.
• Lastly, we have seen a new episode of heightened uncertainty in domestic economic policy. The key topics being discussed, with no consensus as of yet on how to proceed, include a reduction in the working week and the forgiveness of part of the regional debt.

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