Publications

Spain is reducing its deficit and risk premium thanks to economic growth, even in the absence of an approved budget. However, net primary spending is rising above what was committed, and if the cycle cools, confidence could deteriorate.

The Historical Balance of Public Sector Borrowing Requirements (HBPSBR) was 52.6% of GDP at the end of 2025 vs. 52.0% in 2024. We expect the HBPSBR to be around 53.9% by year-end.

The economy is showing a growth pattern similar to that of the years prior to the global financial crisis, driven by the same combination of factors. The risk—just as back then, and without necessarily leading to the same outcome—is that this model could generate imbalances if it is not accompanied by structural reforms.

Spain is entering 2026 with one of the strongest growth trajectories in Europe. After expanding by 3.5% in 2024 and 2.9% in 2025, BBVA Research, in its latest forecasts released last December, projects growth of 2.4%.

The latest data from the National Accounts of the INE provide an image that, at first glance, could revive old ghosts of the Spanish economy. Following a post-pandemic recovery supported by the foreign sector's contributions, the dynamics have shifted.

Between 2025 and 2027, GDP will be driven by domestic demand: resilient household consumption, supportive public spending and investment boosted by a healthier construction sector. Persistently high inflation, cautious monetary policy and a wide fiscal deficit weigh on the outlook.

The total FX position of the economy continued to improve in 3Q25 (with the latest data of Aug25) due to an improvement in public sector’s FX position, led by the CBRT. The composition of external debt continues to shift between the public sector and the real sector.