Spain | Can anything stop the economy?

At BBVA Research, we have revised our forecast for average GDP growth in 2026 upward to 2.6%, from 2.4% previously, despite higher fuel costs, rising inflation, increasing interest rates, and an environment of heightened uncertainty, thanks in part to the resilience of economic activity. Looking ahead, it seems that if anything can slow the pace of growth, it will be the pressures that expanding demand is placing on supply.

Between July and September, quarterly GDP growth may have reached 0.6%, only slightly below the 0.7% recorded in the second quarter. However, this estimate is subject to an unusual degree of uncertainty, as the extraordinary immigrant regularization process is temporarily affecting Social Security registration data, an indicator that, under normal circumstances, provides an excellent signal of employment and GDP trends. The problem is that, as a result of the regularization process, Social Security registrations may include individuals who were already working in the informal economy, thereby suggesting job creation that actually reflects only the formalization of existing employment.

Even after adjusting for the impact of the regularization process, as we have done, economic growth remains remarkably robust. Households and businesses have shown surprising resilience in the face of higher fuel costs. On the one hand, although the increase in oil prices has been significant, it started from relatively low levels: in real terms, today's price of $100 per barrel is equivalent to $70 five years ago. On the other hand, the rise in energy prices following Russia's invasion of Ukraine has heightened the need for greater energy efficiency and spurred investment in renewable energy sources. Households, meanwhile, have drawn on their savings, with the household saving rate expected to decline by more than 1 percentage point of gross disposable income, while profit margins in key segments of distribution chains appear to be absorbing much of the increase in costs. Finally, fiscal policy has become more expansionary, providing resources to help contain price increases.

In addition to inflation, the other factor weighing on the economy is rising interest rates. So far, their effects appear limited, given the continued strength of consumption, particularly of services, and certain components of investment, such as machinery purchases (excluding transportation equipment). To understand this limited impact, it is important to recognize that Spain's private sector is far less vulnerable to rising interest rates than in the past. For example, mortgage debt now represents less than 50% of household disposable income, compared with nearly 100% in 2008. Variable-rate financing accounted for 98% of the total at that time, versus just 47% today. Finally, household savings currently stand at 10.7% of income, compared with 8.2% back then, while deposits have risen to nearly 103% of household income.

However, this does not mean that an adjustment will not take place. By 2027, we expect growth to moderate to 2.1%, partly as a result of the persistence of this adverse external environment. This would lead to a reversal of some of the temporary measures adopted by households and businesses, such as reducing savings or compressing profit margins, resulting in slower growth in consumption and investment. Nevertheless, growth of 2.1% would be in line with the average recorded over the past 30 years.

If demand remains this resilient, attention will inevitably shift back to the supply side and the bottlenecks emerging from insufficient investment and labor shortages in key sectors, including housing, electricity distribution, transportation, and tourism. Over the medium term, growth will not be sustainable unless these challenges are addressed. It is better to tackle them now, while the economy still benefits from some tailwinds.

Press article. Published in Expansión on October 13, 2026.