The Bank of Spain has revised down its growth forecast for 2025, attributing the change to significant economic uncertainty caused by US trade policies
The central bank's governor, Jose Luis Escriva, announced on Monday that GDP is now expected to grow by 2.4%, a decrease from the earlier estimate of 2.7% made in March
Spain’s economy is expected to keep outpacing the euro-area average, supported by strong performance in tourism, consulting, and IT sectors, as well as lower energy prices and increased migration, the central bank governor added while presenting the central bank’s annual report in parliament.
Escriva, who is also a member of the European Central Bank’s (ECB) Governing Council, noted that the recent ECB interest rate cut, the eighth in a year, may require adjustments to its underlying policy assumptions, citing uncertainty in part driven by US President Donald Trump’s trade policies, Bloomberg reports.
Trump has implemented a 90-day suspension on higher tariffs targeting the European Union, set to expire on 9th July. EU Trade Commissioner Maros Sefcovic stated last week that negotiations with the US were progressing positively, but he criticised the imposition of new tariffs on steel and aluminium imports, saying they were unhelpful to the discussions.
Spanish inflation slowed more than anticipated last month, driven by a more moderate rise in electricity prices and declines in certain transport and recreation costs, strengthening the argument for further interest rate cuts.
Escriva stated that the Bank of Spain now projects inflation at 2.4% for 2025, slightly down from the 2.5% forecast made in March.
Consumer price growth is also expected to slow further to 1.7% in 2026, dipping below the European Central Bank’s 2% target.
Furthermore, the central bank also revised its GDP growth outlook for 2026, lowering it to 1.8% from a previous estimate of 1.9%.
The “extraordinary uncertainty” could result in a worse scenario “in the coming months,” the governor went on to say.