Basque Country

In 2024, the Basque economy was somewhat more sluggish than the Spanish economy as a whole: we estimate that GDP grew by 2.8% (vs. 3.2%). This below-average growth is mainly due to the weakness of industry, which is highly important in the region and was hit by subdued foreign demand. On a positive note, residential construction and services, especially trade, hotels and restaurants, and transportation, performed strongly.

Our forecasts indicate that GDP will grow by 2.0% in 2025 (2.4% in Spain). Thanks to the strong structural positioning of its industry, it is one of the best placed regions to benefit from European funds. Coupled with lower financing costs, we expect investment to drive growth. Meanwhile, easing inflation and interest rate cuts will help to revive consumption. Risk factors include the US tariff policy, which will have a major impact on the region.

The Basque labour market is slightly more sluggish than across the country as a whole. After growing by 1.5% in 2024, almost 1 point below the average, the rise in the number of registered workers affiliated to Social Security began to falter at the start of 2025, growing by 1.0% year-on-year in May, the second lowest rise across all regions (2.2% in Spain). Job creation in transportation, professional activities and healthcare has been outstanding over the last year. Meanwhile, the unemployment rate is one of the lowest in the country (7.7% in Q1 2025 vs. 11.4% on average).

The volume of sales of retail and consumer goods shows that household spending has performed more strongly than across Spain as a whole in recent years, growing by 2.4% in 2024 (2.1% on average) and 4.0% year-on-year in January-April 2025 (vs 2.6%). Passenger car registrations have also been growing at a good pace, both in 2024 (5.6% vs. 7.1%) and in January-May this year (13.9% year-on-year vs. 13.6%).

Industrial activity in the Basque Country has performed very poorly over the last two years, hit by sluggish global demand and the decline in the energy sectors as a result of prices returning to normal (the region has a refinery). Consequently, after a sharp decline in the previous year, the IPI failed to recover in 2024 (–0.2% vs. 0.7%) and in early 2025 it fell by 1.6% year-on-year up to April (–0.3% in Spain); so it remains far below (–6.1%) where it stood in 2019 (–0.9% across Spain).

As with industry, Basque exports have suffered a sharp decline, especially last year when they fell by 5.1%, one of the sharpest falls of all regions, while on average the country is experiencing a period of stagnation. Exports of electrical appliances, engines and industrial machinery were strong, in stark contrast to the decline in sales of transport equipment, motor vehicles and semi-finished goods, especially iron and steel. This year has started somewhat better, with a 1.6% year-on-year increase up to March
(vs. 2.6% on average nationwide).