La sagrada familia in Spain

Spain Economic Forecast

Spain Economic Outlook

Momentum should be weakening in the current quarter, after the economy expanded at a soft clip in Q4, weighed down by notable contractions in consumer spending and fixed investment. The unemployment rate rose for the second consecutive month in February, highlighting cooling labor market dynamics. Moreover, in January, industrial production contracted and sequential retail sales growth slowed further, signaling constrained consumer spending amid soaring core inflation—which reached a record high in February. On the other hand, in February, the services PMI moved further into expansionary terrain, and the manufacturing PMI signaled expansion for the first time in eight months. In politics, the government recently approved a controversial pension reform, entirely funded by higher social security contributions and unlikely to guarantee financial sustainability.

Spain Inflation

Harmonized inflation rose to 6.0% in February from January’s 5.9%, while core inflation hit a fresh record high. Price pressures should ease this year amid higher interest rates, weaker domestic demand and stabilizing commodity prices. That said, inflation will remain elevated. Pre-election fiscal spending poses an upside risk. Commodity price swings are a key factor to watch.

Spain Economic Data

2017 2018 2019 2020 2021
Population (million) 46.5 46.7 47.1 47.4 47.4
GDP (EUR bn) 1 1 1 1 1
GDP per capita (EUR) 24 25 26 23 25
Economic Growth (Nominal GDP, ann. var. %) 4.3 3.6 3.5 -10.2 7.9
Economic Growth (GDP, ann. var. %) 3.0 2.3 2.0 -11.3 5.5
Domestic Demand (ann. var. %) 3.3 3.0 1.7 -9.4 5.3
Private Consumption (ann. var. %) 3.0 1.8 0.9 -12.4 6.0
Government Consumption (ann. var. %) 1.0 2.3 1.9 3.5 2.9
Fixed Investment (ann. var. %) 6.8 6.3 4.5 -9.7 0.9
Exports (G&S, ann. var. %) 5.5 1.7 2.2 -19.9 14.4
Imports (G&S, ann. var. %) 6.8 3.9 1.3 -14.9 13.9
Industrial Production (ann. var. %) 3.1 0.4 0.6 -9.5 7.3
Retail Sales (ann. var. %) 0.7 0.8 2.4 -6.8 3.2
Home Prices Index (ann. var. %) 2.4 3.4 3.2 -1.1 2.1
Disposable Income (ann. var. %) 3.2 2.8 5.0 -2.0 3.1
Unemployment (% of active population, aop) 17.2 15.3 14.1 15.5 14.8
Fiscal Balance (% of GDP) -3.1 -2.6 -3.1 -10.1 -6.9
Public Debt (% of GDP) 101.8 100.4 98.2 120.4 118.3
Inflation (HICP, ann. var. %, eop) 1.2 1.2 0.8 -0.6 6.6
Inflation (HICP, ann. var. %, aop) 2.0 1.7 0.8 -0.3 3.0
Inflation (Core, ann. var. %, aop) 1.1 0.9 0.9 0.7 0.8
Inflation (PPI, ann. var. %, aop) 4.4 3.0 -0.4 -4.3 17.3
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 0.00
3-Month EURIBOR (%, eop) -0.33 -0.31 -0.38 -0.55 -0.57
10-Year Bond Yield (%, eop) 1.55 1.42 0.45 0.04 0.56
Stock Market (var. of IBEX 35 %) 7.4 -15.0 11.8 -15.5 7.9
Exchange Rate (USD per EUR, eop) 1.20 1.14 1.12 1.22 1.14
Exchange Rate (USD per EUR, aop) 1.13 1.18 1.12 1.14 1.18
Current Account Balance (EUR bn) 32.2 22.6 26.2 6.8 11.5
Current Account Balance (% of GDP) 2.8 1.9 2.1 0.6 1.0
Merchandise Trade Balance (EUR bn) -24.7 -33.8 -32.0 -13.4 -26.2
Foreign Direct Investment (EUR bn) 34.9 50.3 15.5 4.6 8.6

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