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The military conflict in Iran has reintroduced a significant source of uncertainty into an economic context which, until recently, had been showing notable resilience. The closure of the Strait of Hormuz and the resulting rise in energy costs necessitate a recalibration of the macroeconomic scenario, both globally and for the Spanish economy. In this edition of the Monthly Report, we present our updated forecasts for 2026 and 2027, analysing how this geopolitical episode is impacting financial markets, the international economy and the Spanish economy. The report is supplemented with other analyses of interest, such as the new (im)balances in the oil market; the impact of the inflationary spike on European households’ well-being; the exposure of Spain’s economic sectors to the energy shock; the persistence of the generation gap in income and wealth, and the challenges facing the public accounts and compliance with European fiscal rules.

In the May issue of the Monthly Report, we include a special dossier to analyse the present and future of the new AI economy, addressing its macroeconomic, business, financial and geopolitical implications. We begin with an overview of the global deployment of AI from a supply-side perspective, analysing the value chain, the role of infrastructure, energy and semiconductor bottlenecks, and the position of different powers in this technological race. We then examine how AI could drive productivity growth, as well as what we know – and do not know – about its effects on employment, emphasising that the leap from microeconomic improvements to macro impacts will be gradual and uneven across countries and sectors. In Spain, AI adoption by firms is advancing rapidly, but remains limited and uneven, posing significant challenges for productivity and for the cohesion of the economy’s productive base. We also address AI governance strategies in the US, China and the EU, and the balances between innovation, regulation and adoption that will shape AI geopolitics in the coming years. Finally, we cover AI in financial markets, the valuations of big tech firms and the risks associated with high concentration and the growing investment needs in infrastructure.

This month we explore in depth the impact and implementation of the Next Generation EU funds in a new Dossier. We begin with an analysis of the status of the implementation of these funds at the European level, followed by an assessment of their impact and future challenges. Next, we examine how they are being managed in Spain, highlighting both current achievements and future expectations. We also address investments beyond NGEU, which are necessary in order for Europe to adapt and thrive in an environment as demanding as the current one. Finally, we compare the US model of economic transformation with the European approach.

We are living increasingly longer and healthier lives – excellent news for all of us. However, this longevity, combined with a persistently low birth rate, is reconfiguring the demographic structure of our societies. In our latest Dossier, we analyse this important demographic shift, as well as its impact on growth, public finances, and savings and interest rates. We also analyse in depth other topical issues, such as the adjustment of the ECB’s monetary policy strategy and operational framework, the European Union’s 2025-2028 budget and the feasibility of it increasing defence spending to 5% of GDP. In the sphere of the Spanish economy, we lay out the causes of departures from employment and the evolution of the incomes of the middle class in recent years.

In the first issue of 2025, we stop to take a snapshot of foreign demand for housing, international business tourism and the savings of Spanish households according to their demographic and income profile. We continue to analyse the European economy’s exposure to US tariff hikes, this time from the perspective of value chains, and we also assess the challenges for European fiscal policy following the entry into force of the new economic governance framework.

October is the month in which we present the update of our economic forecast scenario. Broadly speaking, the world economy is moving at a higher cruising speed than had been anticipated at the beginning of the year, and the buoyancy of the Spanish economy leads us to revise our growth forecast for 2025 upwards. In addition, in this issue we analyse how Trump 2.0 policies could favour investment flows into the euro area, as well as the relationship between firm size and productivity gaps in the European Union. We also review the recovery of Europe’s tourism sector following the pandemic, we take stock of the summer season for Spain’s tourism sector and we identify which autonomous communities could be the most affected by the US tariff hikes.

The global economy faces the final stretch of 2026 in a challenging environment. The prolonged conflict in the Middle East is keeping energy prices high and has led central banks to tighten monetary policy, while the resilience of economic activity and the investment boom associated with AI are acting as counterbalances. In this October issue, we present the update of our international economic and financial forecasts and we analyse the new balance between inflation, interest rates and growth. We also revise our macroeconomic outlook for Spain: we have raised the growth forecast for 2026 to 2.6% and maintained the 2027 forecast at 2.0%. We also assess the potential institutional and economic effects of the upcoming US midterm elections, we examine the consequences of the migration policies of the second Trump administration, and we take stock after a particularly dynamic high tourist season in Spain.