Spain | Cyclical Behavior of GDP up to 1Q25 and Tariff Uncertainty

Summary

The observatory analyzes the cyclical behavior of GDP and exports in Spain up to the first quarter of 2025, highlighting a negative gap in GDP per working age population (WAP) compared to its trend level (-0.9 pp), although its growth slightly exceeds the historical trend.

Key points

• Key points:
• Supply shocks have negatively affected growth, except wage margins and interest rate differentials, which have positively influenced it. On the other hand, domestic demand—particularly in consumption, housing, and credit—has positively contributed to GDP growth.
• The labor market remains tight, with a notable increase in the vacancy-to-unemployment ratio since 2019. Productivity and hours worked show strong performance at the start of 2025.
• The external sector has supported growth since the pandemic, although exports have recently moderated due to weaker external demand. Meanwhile, imports have also declined due to improved domestic competitiveness.
• Potential tariff increases would lead to a moderate reduction in exports (-1.6%) and a slight decrease in GDP (-0.3 pp) between 2025 and 2027, though with limited impact on the trade balance.
• Spain maintains a relatively favorable negotiating position with the U.S. compared to the European average, standing out positively in trade, although showing certain weaknesses in direct investment and defense spending.

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