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The energy crisis has served as an incentive within the EU to accelerate the transition to energy sources that are more environmentally friendly and less dependent on fossil fuels, but this is seen as more of a medium-term goal.

Spain’s National Statistics Institute has revised the growth of recent years upwards and the flash indicators for Q3 point to an improvement in private consumption, despite the slowdown in the labour market in the quarter. Inflation unexpectedly fell to 1.5% in September, while housing demand was higher than expected.

As a result of the deterioration in the expectations for the growth of oil demand, we have considered it appropriate to revise our baseline scenario for energy prices, although we are aware of the difficulty of incorporating the uncertain geopolitical scenario into the forecasts.

After growing by 3.2% in 2024, in 2025 the economy is expected to continue to grow above the euro area average, supported by strong household consumption and the recovery of investment. The major geopolitical challenges and Europe’s weak growth represent the main risk factors.

Euro area inflation has been steadily declining for one clear reason: easing energy tensions. The question now is whether it will continue to fall rapidly towards 2% or whether it will encounter new pitfalls that hinder its downward path.

The world economy ended the first half of 2023 with three major dynamics: economic activity remained resilient, inflation fell steadily in all major economies, and financial conditions continued to tighten.

The good performance of the foreign sector, especially services exports, largely explains the significant buoyancy that the Spanish economy is showing. Besides the usual strength of tourism, the strong growth of non-tourism services also stands out.

The feeling is that we are close to a turning point, after which the effects of the monetary tightening process that have accumulated in the last year and a half.

The start of 2025 has brought a change in the focus of the financial markets, which was consolidated in February. Investors have shifted their attention away from the central banks, which were the main driver of the markets in 2024, towards an environment of high geopolitical risk, with the «Trump effect» as a key catalyst.

Last year, when we witnessed the heavy blow that the pandemic dealt to the economy, an intense debate began regarding what shape the recovery would take. The more pessimistic predictions opted for somewhat disheartening letters, such as L, W or K.

In this first article in a series of two, we review the recent trends in capital investment in Spain and make a comparison with the rest of the euro area. In a second article in this same Monthly Report, we investigate the incentives for investing, based on an analysis of the evolution of profitability and the cost of financing, sector by sector.

Spain’s economy continues to grow at a considerable rate, although the escalating conflict between the US and Iran is once again generating tensions.

The surge in uncertainty and the tariff hikes introduce downside risks to global growth, as well as upside risks to US inflation, while the impact on prices for the rest of the world is much more uncertain. 

Behind the recent upheavals and volatility, the euro area and the ECB are making progress towards a new normal for the financial environment. In recent years, the ECB has reduced its footprint in the market by returning to conventional monetary policy and withdrawing forward guidance.

Three and a half years later, Spain’s GDP has finally recovered to the pre-pandemic level. However, the recovery of the Spanish economy has not occurred in unison: some aspects have improved more quickly, while others are lagging further behind.