The limits and strengths of Spain’s economic resilience

The Spanish economy has stood out for its strong performance for several years now, and 2026 will be no exception. With the third quarter now over, all indications are that growth will once again exceed 2.5% this year, most likely reaching 2.6%. GDP growth will once again exceed forecasts made at the start of the year (CaixaBank Research projected 2.1%, while the consensus forecast among economists was 2.2%). It will also outpace most developed economies: US growth is expected to be only slightly above 2%, compared with around 1% in the euro area. Moreover, growth will be well above the Spanish economy’s historical average of 2.1% a year since 1995.

This strong performance is all the more notable given the environment in which the Spanish economy is operating: an inflation shock stemming from the war in the Middle East, a new cycle of rate hikes by the ECB and a widening of sovereign risk premia in some major countries.

The Spanish economy’s resilience rests on three pillars: a broadly sound financial position, robust domestic demand and buoyant services exports. None of these three elements are new, but it is notable that all three remain in place despite the passing years. Private debt remains relatively low, while public debt is still high. However, unlike other advanced economies, the budget deficit remains contained, allowing the public debt ratio to continue to gradually fall. International investors’ assessment is broadly positive: Spain’s risk premium remains between 60 and 65 basis points, while France’s has been above 150 basis points for several weeks now and Italy’s above 100 basis points.

The strength of domestic demand is supported partly by the private sector’s sound financial position, mentioned above, as well as by two additional factors: the impact of NGEU funds, which we expect will continue to feed through to the productive sector despite the programme having ended, and population growth, underpinned by migration flows. Finally, buoyant services exports reflect the tourism sector’s continued strength and, above all, the competitiveness of Spain’s non-tourism services exports. Exports of non-tourism services now account for 8.5% of GDP, nearly 2 percentage points more than in 2019. By comparison, exports of tourism services have risen by just over 1 percentage point in the same period, to 5.5% of GDP.

The future is not set in stone, and 2027 could once again surpass our expectations. If the war in the Middle East ends soon, Spain’s economy has enough strengths to sustain robust growth in household consumption and business investment. However, its resilience also has limits, especially if the conflict becomes protracted or intensifies. In that case, pressures on energy prices would increase, the ECB could be forced to raise interest rates further and sovereign risk premia could come under renewed pressure. Added to this are two major structural challenges: the growing housing shortage, which is pushing up prices and making homes less affordable, especially for lower-income groups, and persistently weak productivity growth, which must improve if economic growth is to be sustainable over the long term. The Spanish economy’s strengths provide grounds for cautious optimism about the future, although its resilience, like that of any economy, has limits.