The Spanish economy faces a turning point. During the presentation of the macroeconomic forecasts for the period 2026-2028, Funcas's general director, Carlos Ocaña, and the director of Conjuncture, Raymond Torres, pointed out that, although the current differential growth remains close to 2.5% driven by domestic demand, the country is heading towards a mild slowdown.
GDP growth will moderate to 1.8% in 2027 and to 1.7% in 2028, conditioned by the persistence of inflation, high interest rates, and the lower contribution from the external sector and tourism.
The slowdown is already noticeable in the final stretch of the year, with a quarter-on-quarter growth that will drop to 0.5% in the third quarter and to 0.4% in the final stretch. One of the main concerns highlighted by Ocaña is persistent inflation, which places the estimated annual average at 3.7% for this year and 3.1% for the next. This inflation differential compared to Europe is fundamentally due to internal pressures and the services sector, exacerbated by the energy price increase resulting from the conflict in the Middle East and the gradual withdrawal of public aid. Funcas stresses the urgent need to avoid second-round effects and a loop between prices and wages.
Loss of purchasing power and depletion of savings
The report indicates that the loss of purchasing power of households is diminishing their resilience. Private consumption has been sustained by reducing the savings rate —which has fallen from 13% to 11%—as the average wage increase (3.6%) is evolving below the cost of living.
In the labour market, although the creation of 770,000 net jobs is expected by the end of 2028 and a decrease in the unemployment rate to 9%, the pace of hiring will be halved compared to the previous three years. Raymond Torres emphasised that the sustainability of this expansionary cycle largely relies on the arrival of foreign labour to compensate for demographic decline and cover structural vacancies.
Long-term fiscal sustainability threatened
The public accounts face a complex landscape. The combination of lower economic dynamism, the maintenance of support measures, and the rising cost of financing will raise the public deficit to 2.5% this year, 2.7% in 2027, and 2.9% in 2028.
In the medium term, analysts warn that, in the absence of structural and budgetary reforms, the deficit will exceed the 3% limit starting in 2030. The cost of interest on public debt will soar from the 43.5 billion euros projected for 2026 to nearly 64,000 or 65,000 million euros in the next decade. With debt stabilised around 96%-98% of GDP, the fiscal room for manoeuvre in the face of future crises or external shocks is practically nullified, necessitating a review of spending efficiency, pensions, and taxation to ensure the country's economic stability.
