Publications

The Spanish economy remains dynamic, with growth forecast at 2.6% in 2026, although economic activity and employment are slowing. Demand continues to support the expansion, but weak productivity, subdued investment and supply-side constraints limit its sustainability and economic convergence.

The execution of NGEU funds in Spain has allocated €62.726 billion. Public investment rose from 2.2% to 2.9% of GDP, failing to close the gap with the EU. The multiplier effect on private investment and productivity has been limited, hampered by a context of multiple economic shocks.

The Plan has awarded €62.7 billion, 78% of the amount planned. Individuals and SMEs account for most beneficiaries; large and medium-sized firms for the amount awarded. Implementation is higher in lower-income regions. Two months before the deadline, the current implementation rate is not enough to complete the commitments.

The economy is showing resilience thanks to expansionary fiscal policy and the mild impact of the Strait of Hormuz crisis. However, the expiration of public aid and European funds, together with higher costs, points to an economic slowdown during the second half of the year.

Using a panel data local projections model and controlling for firm characteristics, procurement bid attributes, and macroeconomic conditions, the study estimates the dynamic effects of procurement awards on new lending, a more precise measure than the change in the stock of credit.

So far, the impact of the Next Generation EU funds on investment and productivity has been less than expected. However, with a broad consensus and structural reforms, Spain should be able to realize its potential and consolidate more solid, sustainable, and productive growth.

There is tension in the public administration between how easy and fast public funds can reach businesses and families and the need to check that the funds will be used for the intended purpose. This causes delays in awarding subsidies and projects.