BBVA Research cut its forecast for Spanish GDP growth by a tenth this year, to 2.9%, given less progress than expected in the third quarter, although it improved its estimate for 2026 by another tenth, to 2.4%, and calculated that the economic boost in 2027 would be 2%.
In the report on the situation in Spain for December 2025, published on Wednesday, the BBVA Research Service estimates that growth in the fourth quarter of 2025 could reach around 0.7%, somewhat higher than observed in the third quarter of the year, with a more balanced composition of demand.
Thus, BBVA Research expects the average increase in GDP this year to reach 2.9%, which is much higher than the average of the past 30 years (2.1%) and euro area growth (1.4%).
BBVA economists believe that the year 2025 represents the return of domestic demand as an engine of growth, in the face of negative contributions from external demand, because non-resident consumption moderates its growth and imports respond to improvements in household consumption and investment.
Slowed activity
Looking ahead, economists estimate that the expansion will continue in 2026 and 2027, with growth of 2.4% and 2%, respectively.
BBVA Research sees a process of slowdown in activity, which will continue, derived from the depletion of the contribution to outbound tourism growth, the difficulties that exports of goods continue to face, and fiscal policy that will become contractionary from the second half of 2026.
Likewise, the increase in tariffs, trade uncertainty, and the appreciation of the euro against the dollar may have a “slightly larger” impact than expected. Although the data show excessive fluctuations in recent months, the loss of competitiveness observed due to the increase in export costs and the rise in the value of the euro against the dollar could have “more lasting” effects than initially estimated, according to the study.
Creating 480,000 job opportunities on average annually in 2026 and 2027
On the other hand, the labor force will continue to increase, partly due to immigration, which will allow the creation of about 480,000 jobs on average annually over the next two years.
The active population is expected to increase by about 400,000 people in 2026 and 2027, in line with what was observed in 2025. The observed cyclical increase in the participation rate of Spanish workers contributes to this to some extent. However, a large portion of this increase is due to the increase in the population of foreign nationals.
They point to a trend of slow decline in inflation
BBVA Research forecasts point to a slow decline in inflation, which will fall to 2.5% and 2.2% in 2026 and 2027, respectively, which will “facilitate the restoration of purchasing power of salaries,” experts predict.
In this sense, the BBVA Research Service forecasts that a gradual improvement in disposable household income (2.4% and 1.9% in real terms, in 2026 and 2027, respectively) will support the recovery of private consumption (2.9% and 2%, respectively).
Labor income growth will contribute to this, mainly due to increased job creation, but also as a result of the gradual recovery of salaries.
In this context, economists expect monetary policy to be expansionary, which, along with healthy balance sheets of companies, households and banks, would boost financing, especially in favor of investment, which will grow by 6.4% and 4.9% in 2026 and 2027, respectively.
The ECB is supposed to keep its deposit rate at 2% over the next 12 to 18 months, thanks to a combination of inflation targeting, lower growth in the eurozone, and uncertainty about the consequences of increased defense spending and use of Germany’s infrastructure fund.
Home price growth of 10% in 2026 and 9% in 2027
For their part, experts expect housing investment to accelerate over the next few years by 6.2% and 6.4% in 2026 and 2027, respectively, supported by favorable winds that will boost demand. Despite this, home sales will remain practically stable in 2025 and 2026 at about 725,000 units annually.
The entity warned that “this behavior does not respond to weak demand, but rather to the shortage of available product and the resulting increase in housing prices.”
As for prices, they are expected to continue to grow strongly, above 10% this year and about 9% next year, which means excluding part of the potential demand due to the impossibility of payment.
The process of distributing European funds is expected to accelerate
The report also shows that accelerating the implementation of funds linked to the Recovery and Resilience Mechanism and increasing defense spending will support the progress of domestic demand.
As the summer of 2026 approaches, the sense of urgency to spend NGEU funds will increase, so it is expected that public administrations will make efforts to exhaust resources, either by redirecting part of those that are not used towards other projects or uses, or by accelerating pending tenders and subsidies.
Meeting the goal of spending all available funds within the specified period (before August 2026) would mean an increase in implementation of more than 60% in 2025, which could lead to an increase in investment in non-residential construction by 6.7% in 2026, almost double what it will rise this year.
For its part, commitments made to improve European security have led to a stream of agreements in the Council of Ministers: since April this year, nearly 40 billion euros have been approved to spend on defence.
According to BBVA research, the multiplier effects of this type of rush depend on the moment of the economic cycle and the reliance on imports to meet the increasing demand for goods and services for these reasons.