The Bank of Spain has lowered its growth forecast for the Spanish economy in 2025, cutting it by 0.3 percentage points to 2.4%. The announcement was made on Monday, June 9, by the bank’s governor, José Luis Escrivá, during a presentation in the Spanish Congress.

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Slower Growth Due to Global Uncertainty

Escrivá explained that Spain’s economy is slowing down. After growing at more than 3% in recent years, it is now expected to grow closer to 2.5% in the first half of 2025. He said the main reason is a weaker performance in exports.

He pointed to an ‘unprecedented level of uncertainty’ in the global economy, mainly caused by new tariffs from the United States and the risks of trade conflicts. This is making it harder to predict how markets and supply chains will be affected.

Inflation Slightly Lower This Year

The bank has also adjusted its inflation forecast. It now expects inflation to be 2.4% this year, slightly lower than previously thought. In 2026, inflation is expected to fall to 1.7%, but it may rise again in 2027 to 2.5%.

The expected drop to 1.7% in 2026 reflects confidence that inflation will stay under control in the medium term, possibly due to tighter monetary policies by the European Central Bank and more balanced supply and demand.

However, the projected rise to 2.5% in 2027 might be linked to renewed pressures on certain sectors, such as increased global demand for raw materials or higher labour costs. It could also reflect economic recovery picking up pace, which can push prices slightly higher again.

In short, inflation is expected to stay within a manageable range, but global uncertainty and market shifts continue to influence the longer-term outlook.

Other Economic Forecasts Remain Stable

The Bank of Spain has kept its forecast for the public deficit at 2.8% for this year and 2.6% for 2026. Public debt is expected to stay high, at 101.4% of GDP.

Looking further ahead, growth in 2026 is now expected to be 1.8%, down from 1.9%, and will remain at 1.7% in 2027.

Risks from Trade and Industry Links

While Spain doesn’t export much directly to the US, Escrivá warned that some Spanish industries, like chemicals, metals, and pharmaceuticals, could still be affected indirectly, as they produce for other countries that trade with the US.

So far, the economic data doesn’t show major effects, but the Bank of Spain is preparing for a more difficult scenario where uncertainty hurts investment and consumer spending. In that case, growth could fall to 2.1% in 2025 and 1.1% in 2026.

Spain’s Strong Points and Future Challenges

Despite the risks, Spain’s economy has shown strong points compared to the rest of Europe. Escrivá mentioned continued growth in tourism, fewer labour market problems thanks to immigration, and lower energy prices due to renewable energy.

However, he also warned that more work is needed in two key areas: improving the credibility of Spain’s long-term fiscal plans and solving long-term unemployment. Many people are still out of work for extended periods, while at the same time, 40% of companies say they are struggling to find skilled workers.

A Slower but Steady Path Ahead

In summary, the Bank of Spain expects the country’s economy to grow more slowly than before, adjusting its forecast to 2.4% for 2025, mainly due to global uncertainty and weaker exports. Inflation is also expected to ease in the short term, dropping slightly to 2.4% this year and to 1.7% in 2026, before rising again to 2.5% in 2027 as the economy stabilises.

Despite these changes, the outlook remains relatively steady. The public deficit and debt are holding firm, and Spain continues to benefit from factors like tourism, renewable energy, and a more flexible labour market. However, long-term challenges remain, including reducing unemployment and building trust in future economic plans.

While the numbers may shift slightly, the overall message is clear: Spain is on a slower, but still positive path, navigating uncertain global conditions with a cautious eye on the future.