Bank of Spain more optimistic sees neighbouring country growing 2.8% this year – Europe

The Bank of Spain has sharply revised upwards its economic growth forecasts for the neighbouring country both this year and next. Projections released on Tuesday now indicate that gross domestic product (GDP) will grow by 2.8% this year, instead of the 2.3% previously estimated. For 2025, forecasts are for growth of 2.2%, three tenths more than anticipated.

At the same time, the central bank of “nuestros hermanos”, now chaired by José Luis Escrivá, revised the inflation rate for this year slightly downwards, now pointing to 2.9% – one tenth less than previously predicted – but anticipates a value of 2.1% in 2025, one tenth more than in previous forecasts.

The Bank of Spain supports the upward revision of GDP forecasts with the “remarkable robustness of the Spanish economy”, supported by the increase in the population – through immigration -, with the resilience of Spanish industry compared to other European countries and, above all, with the high contribution of external demand.

The Director General of Economics and Statistics at the Bank of Spain, Ángel Gavilán, explained at a press conference that the main driver of the upward revision is the knock-on effect resulting from the new quarterly national accounts data published at the end of July by the Spanish National Statistics Institute.

These data indicated that quarter-on-quarter growth was 0.8%, above expectations and similar to that recorded in the first three months of the year. Furthermore, the latest economic indicators suggest that economic growth in the third quarter will be 0.6%.

The Bank of Spain is thus more optimistic than the Government and the International Monetary Fund (IMF), which are forecasting growth of 2.4%, or the European Commission, which is forecasting GDP growth of around 2.1%.

The upward revision of the growth forecast for next year and for 2026 is largely due to a future scenario of lower benchmark interest rates than that which served as the assumption for the previous forecasts, in June. Another factor justifying the greater optimism is the forecast of a higher contribution from external demand and a slight slowdown in imports.