REGIONAL REPORT
rate, while a weaker global environment— including elevated trade policy uncertainty and U. S. tariffs— will also weigh on external demand. This drag is expected to be partly offset by robust domestic demand, including a pick-up in investment. On the supply side, a gradual slowdown in net migration and demographic ageing will slowly weigh on labour force gains. Key downside risks include an escalation of trade measures, particularly those involving the EU, and domestic political fragmentation, which could hamper the response of fiscal policy in the event Spain’ s deficit reduction fell short of its commitments or market concerns about sovereign risks were to emerge,” added the IMF in June 2025.
“ Closing the productivity gap will require reforms that facilitate firms’ scaling-up and innovation. These include completing both the Spanish and EU single markets for goods and services, streamlining firm sizerelated tax and regulatory thresholds, boosting venture capital through progress toward the CMU complemented by domestic incentives, and promoting excellence in higher education— including through greater autonomy and performance-based funding of universities,” it continued.
Image: Alexander Psiuk / Unsplash.
Guggenheim Museum, Abandoibarra Etorbidea, Bilbao, Spain.
Image: Olga Subach / Unsplash.
Autumn European Economic Forecast 2025
According to the European Commission’ s“ European Economic Forecast 2025”, real GDP growth is expected to remain strong for Spain in 2025, at 2.9 %, moderating gradually afterwards. Economic activity was set to be driven by domestic demand, supported by continued strong labour market performance upholding private consumption, and by the contribution of investment. The“ Autumn 2025 Economic Forecast” showed continued growth, despite a challenging environment
“ Headline inflation is projected to ease from 2.5 % in 2025 to 2.0 % in 2026. The general government deficit is set to keep decreasing from 2.5 % of GDP in 2025 to 2.1 % in 2027, helped by the tax package adopted last year, the phase-out of energy measures and favourable economic developments. The debt-to- GDP ratio is set to decline further and move below 100 % next year,” said the forecast.
“ Following strong growth in the first half of 2025, economic expansion continued in the third quarter as GDP reached 0.6 % q-o-q. This outturn was supported by the strong contribution of private consumption and investment, while net exports contributed negatively to GDP due to the decline of exports and sustained import growth. Economic activity is expected to remain robust over the forecast horizon, with real GDP growth recording 2.9 % in 2025, also reflecting
Barcelona, Spain.
Following strong growth in the first half of 2025, economic expansion continued in the third quarter
a higher than anticipated carry-over from 2024. Real GDP growth is expected to moderate gradually to 2.3 % in 2026 and to 2.0 % in 2027,” it added.
According to the forecast, domestic demand was set to be the key driver of growth over 2025-27, mainly steered by private consumption and the positive performance of investment. Consumer spending was expected to benefit from further purchasing power gains and additional employment growth in a context of sustained inward migration. Net exports were“ expected to contribute slightly negatively to GDP growth in 2025 and 2026, due to a less buoyant evolution of exports and to sustained import growth, before turning marginally positive in 2027.”
“ The positive labour performance of recent years was projected to continue throughout the forecast period. The expected employment gains are mainly attributable to continued migration inflows, which are considerably expanding the labour force and boosting the pace of job creation. The unemployment rate is projected to maintain its downward trend, reaching 10.4 % in 2025 and falling below 10 % in 2026 and 2027. These levels have not been seen in more than ten years but still remain among the highest in the EU,” continued the forecast.
Spanish construction sector
Spain’ s construction sector grew by a modest 2.1 % in 2024: the supply of housing began to reactivate, although it remains far below the demand derived from net household formation.
“ For 2025 – 2026, lower interest rates, the housing deficit accumulated in recent years and the execution of Next Generation EU( NGEU) funds are expected to boost both residential construction and urban regeneration projects, favouring further growth in the construction sector,” commented Caixa Bank Research.
According to market analyst, Technavio, Spain’ s construction market size was forecast to increase by US $ 33.9 billion at a CAGR of 5.4 % between 2024 and 2029( report released in January 2025).
“ The Spanish construction market is experiencing significant growth, driven by the increasing focus on the development of smart city projects and government spending on public infrastructure. These trends are creating lucrative opportunities for local and international players in the industry. However, the market is not without challenges, as high energy and construction material prices continue to pose significant cost pressures. Despite these challenges, the Spanish construction sector is expected to continue its upward trajectory, with the potential for strong returns for companies that can effectively navigate these
44 | ismr. net | ISMR November 2025