Spain | Demand sustains the expansion, while supply determines how long it lasts

Spanish GDP grew by 0.6% in the third quarter of 2026, in line with BBVA Research's estimate, which consolidates our growth forecast of 2.6% for the year as a whole. However, the progress was slightly lower than the 0.7% in the second quarter, so activity slowed down slightly. On the supply side, hours actually worked increased by 2.2% year-on-year. Productivity per hour worked grew by 0.4% in the last year, an insufficient advance to converge with the most productive economies. 

For its part, recent data from the Labor Force Survey show more moderate job creation than in previous quarters. Seasonally adjusted, employment grew by 0.3% quarterly, below the 0.8% expected and the 1.1% observed in Social Security affiliation. Unemployment increased by 95,900 people and the seasonally adjusted unemployment rate remained at 10.2%. Overall, the data point to a slowdown in job creation and a downward resistance in the unemployment rate, in contrast to Social Security affiliation, which is pressured upwards by the extraordinary process of regularizing immigrants.

These data confirm that the Spanish economy's growth model continues to be more expansive (due to job creation, mostly immigrant) than intensive (due to productivity increases). That is why it is interesting to analyze GDP per working-age person (WAP), which allows us to evaluate to what extent this variable improves due to increases in the employment rate and productivity. To identify the factors that explain GDP per WAP, the Observatory of BBVA Research, FEDEA, and the Rafael del Pino Foundation apply a model that allows decomposing the contribution of different supply and demand shocks to growth.

With the forecasts that have been confirmed for the third quarter of 2026, it is observed that demand factors, such as more expansive fiscal policy, contribute 1.1 pp to the year-on-year growth of GDP per WAP compared to its historical average. Supply factors subtracted 0.7 points, so the advance remained 0.4 points above that average. Although growth remains positive, its foundations are weak to ensure the improvement of GDP per WAP in the long term.

After several years above its trend, GDP growth per WAP is expected to close 2026 close to its historical average. This slowdown is consistent with that of aggregate GDP: we forecast growth of 2.1% in 2027, half a percentage point below that forecast for 2026.

In comparative terms, the weak growth in productivity per hour worked means it remains at around 74% of that of the eight leading economies in the EU, practically at the same level as two decades ago. Spain has advanced in per capita income and has reduced unemployment, but the productivity gap continues to limit convergence.

In the coming quarters, it will be necessary to alleviate restrictions that condition future growth: the shortage of affordable housing, upward pressure on the CPI and interest rates, the saturation of electrical networks, the aging of the active population, and the withdrawal of European NGEU funds. It will also be important to take advantage of the opportunities offered by artificial intelligence and the increase in defense spending. To do this, investments will have to materialize and the infrastructure and capabilities of the labor supply must accompany them.

In short, the most recent data show a cycle that maintains the expected dynamism, although quarterly growth and job creation are losing momentum. Demand and credit have cushioned the worse performance of supply factors, while the weakness of investment and the scarce advance in productivity condition the medium-term growth prospects. Sustaining convergence and employment will require raising productivity and expanding our economy's productive capacity, from housing supply to infrastructure. The duration of the expansion will depend on whether activity can respond to demand growth with more production and productivity.

Press article. Published in Expansión on November 1, 2026.