Spain | Resilient growth, key challenges

Summary

The scenario for the Spanish economy points to the continuation of the pattern observed in recent quarters: The expansion will be sustained as long as the capacity to create employment increases and the productivity of capital continues to grow.

Key points

• Key points:
• The forecasts have improved. A year ago, BBVA Research expected 2024 to close with a GDP increase of 3.1% and a subsequent moderation in 2025 and 2026 (2.3% and 1.7%, respectively).
• The INE's revision of the historical series, together with an above-expectation performance, now puts growth at 3.5% for 2024, and at 2.9% and 2.4% for 2025 and 2026, respectively.
• The most notable boost comes from the increase in the working-age population linked to immigration, which accounts for about half of the recent GDP growth.
• The second of the drivers is the improvement of total factor productivity (TFP). In a context of weak growth in labor productivity and investment that has yet to gain the strength it should, the area showing improvement has been capital productivity.
• Future growth could be constrained by the lack of affordable housing, the limited effectiveness of labor policies, and weak private investment. These factors threaten the sustainability of employment, productivity, and the supply of low-cost energy.

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