Bankinter | The Bank of Spain (BdE) has revised its GDP forecasts for 2025 to 2.7% year-on-year (up 0.2pp); and unchanged at 1.9% for 2026 and 1.7% for 2027. It has also revised the inflation projections for 2025 upwards to 2.5% (up 0.4pp), due to the rise in energy prices, and maintains those for 2026 and 2027 at 1.7% and 2.4% respectively. They project an unemployment rate of 10.5% (down by 0.3) in 2025; 10% (down by 0.4) in 2026 and no change at 9.5% for 2027. The estimated deficit for 2024 is 3.4%, ‘due to the extraordinary expenses of the DANA (the high-altitude isolated depression which caused flash floods in the Valencia region and others) and the unfavourable rulings for the Administration’ and which would moderate to 2.8% in 2025 and 2.6% in 2026 and 2027.
Bankinter analysis team’s view: The projections do not include the increase in tariffs, nor the possibility of an increase in public spending on defence in the EU. The upward revision of growth in 2025 is fundamentally based on the positive effect of a stronger than anticipated end to the year and the expectations of growth in Household Consumption. The Bank of Spain points to the ‘extraordinary uncertainty’ in the international environment and that geopolitical and trade tensions have experienced ‘very significant upturns’ in recent months. The higher than expected evolution of Q4 2024 (up 0.8% quarter-on-quarter) has a positive effect on our projections for 2025, which envisaged GDP growth of 2.2% year-on-year in the central scenario (2.7% in the optimistic scenario). For 2026 we project a moderation of growth to 1.9% year-on-year. From our point of view, the resilience of Private Consumption growth and the reactivation of Investment are key to growth, the levels of uncertainty about the tariff environment are very high.
