OECD Economic Outlook, Volume 2026 Issue 1

Spain

Economic growth remains robust but is projected to moderate from 2.8% in 2025 to 2.2% in 2026 and 1.7% in 2027. Growth will continue to be driven by domestic demand, with private consumption supported by robust employment gains and investment benefiting from EU-funded projects. Net exports will weigh on activity due to solid import growth and more moderate external demand. Inflation will rise temporarily to around 3.3% in 2026, reflecting higher energy prices, before declining to 2.9% in 2027 as energy effects fade. Risks are tilted to the downside, largely due to external factors.

Fiscal policy is expected to remain broadly neutral in 2026 and become more restrictive in 2027. Government measures to mitigate the impact of higher energy prices are expected to cushion the slowdown in activity and partially dampen inflationary pressures. These measures should be better targeted at vulnerable social groups and temporary to cushion the social impact of higher energy prices while limiting fiscal costs. Securing Spain’s fiscal consolidation path while rebuilding fiscal buffers ahead of rising ageing-related spending should remain a priority. To fully harness the expansion of renewable electricity generation, Spain should continue to invest in grid infrastructure, interconnections and storage capacity.

Activity remains resilient

Real GDP grew by 2.7% over the year to the first quarter of 2026, outpacing most European peers, driven by robust private consumption. Social security affiliations expanded by 2.4% year-on-year in April, while the unemployment rate reached 10.3% in March. Strong job creation and nominal wage growth supported consumption. Business expectations moderated in April, particularly in the services sector, while manufacturing expanded solidly. Headline inflation rose to 3.5% in April, largely driven by higher fuel prices amid the evolving conflict in the Middle East, while core inflation reached 3.2% with persistent services price inflation.

Spain

1Seasonally and calendar adjusted data.

Source: Eurostat; and OECD Economic Outlook 119 database.

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Spain: Demand, output and prices

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Credit to non-financial private businesses continues to expand, and exports have remained resilient despite global challenges, driven by strong growth in services exports, particularly non‑tourism services. The average tariff on Spanish exports to the United States is expected to remain below 15% following the Supreme Court ruling in February, though some sectors are expected to be more affected. Spain’s exposure to the evolving conflict in the Middle East is limited, operating mainly through higher energy prices which are partially cushioned by a temporary government support package of EUR 5 billion (0.3% of GDP) including tax and excise duty cuts, and targeted subsidies for most affected sectors.

Fiscal policy will be neutral

Fiscal policy is expected to remain broadly neutral in 2026 and become more restrictive in 2027, with a gradual improvement in the fiscal balance to 2.2% of GDP in 2026 and 2027. Solid nominal growth in 2026–27 will support revenues, while the phasing-out of extraordinary spending, such as flood-related aid in Valencia, will lower expenditure as a share of GDP, reducing the fiscal deficit despite higher defence spending. This improvement will be partly offset by temporary measures to cushion higher energy prices in 2026 and by higher inflation-linked pension costs in 2027. As a result, public gross debt (Maastricht definition) is projected to decline gradually over the projection period to 97.3% in 2027.

Growth will remain resilient despite the uncertain international environment

GDP is projected to grow by 2.2% in 2026 and 1.7% in 2027, supported by strong domestic demand. Private consumption will expand, supported by a solid labour market and real wage growth, but rising energy prices are expected to weigh on it, even if partly cushioned by the government support measures. Investment is projected to strengthen as residential construction recovers and remaining European funds are deployed. Strong domestic demand will raise imports, euro area weakness will weigh on exports, and services exports will moderate. Inflation is projected to rise from 2.7% in 2025 to 3.3% in 2026 reflecting higher energy prices, before easing close to 2.2% by end 2027. Prolonged conflict in the Middle East could intensify energy disruptions, keeping inflationary pressures elevated for longer and lowering growth, but also boost tourism in Spain, as travellers shift toward destinations viewed as safer.

Rebuilding fiscal space while unlocking productivity growth

Policy should focus on using the current growth momentum to rebuild fiscal space while laying the foundations for stronger productivity growth. Measures to mitigate high energy prices have helped to cushion activity and inflation but should be better targeted at vulnerable social groups and temporary to cushion the social impact of higher energy prices while limiting fiscal costs. Putting debt on a firmly declining path will require sustained consolidation alongside structural reforms. Securing Spain’s fiscal consolidation path while accelerating the deficit reduction would help rebuild fiscal buffers ahead of rising ageing-related spending. At the same time, boosting stronger productivity growth hinges on creating a more supportive business environment by improving access to finance and reducing the administrative burden. Spain is well positioned to leverage its strong expansion of renewable energy, but fully realising these gains will require streamlining permitting processes, accelerating investment in grid infrastructure and supporting investment in storage. This would enhance energy security and support investment and long-term growth.