BBVA raises Spain 2026 GDP forecast to 2.6% while warning on energy shock and housing

Macroeconomic outlook and growth revisions

In its October Situación España report, BBVA Research raised its projection for Spanish gross domestic product growth in 2026 by two tenths of a percentage point to 2.6%. The upward revision reflects updated National Statistics Institute data alongside sustained momentum in domestic consumption, inbound tourism spending, and non-tourist service exports. For 2027, the research department kept its GDP expansion forecast unchanged at 2.1%. Private consumption is projected to rise by 3.1% in 2026 and 2.2% in 2027, supported by expected employment growth of 2.4% this year and 2.0% next year, as well as rising household wealth linked to real estate values.

Energy shock and persistent inflation

Escalating energy costs tied to conflict in the Middle East and instability along shipping routes represent a substantial headwind for the economy. BBVA Research calculated that higher oil and gas prices could subtract between 0.4 and 0.5 percentage points from GDP growth and add between 0.8 and 0.9 percentage points to inflation through the end of 2027. September inflation reached 4.9%, marking its highest reading since early 2023 due to expensive fuels and fresh food. The government renewed crisis mitigation measures, including diesel rebates and regulated gas tariff caps, but BBVA economists project annual headline inflation to average 3.6% in 2026 and 3.2% in 2027. While households initially buffer price spikes by drawing on savings or taking on debt, prolonged energy inflation reduces that capacity and dampens overall expenditure.

The economists summarized the mechanism during the report release.

The longer the rise in energy costs lasts, the greater the impact on activity will be.

Interest rates and productivity hurdles

Monetary policy conditions will introduce further drag on domestic investment. BBVA Research projects that the European Central Bank will implement an additional 25-basis-point interest rate increase in December 2026, establishing a benchmark rate of 2.75% that remains in place throughout 2027. This tightening is projected to subtract 0.3 percentage points from average annual GDP growth across 2026 and 2027, with private investment potentially dropping by up to two percentage points. During the report presentation, Jorge Sicilia and Rafael Doménech also addressed structural economic imbalances, pointing out that while Spain created approximately 2.5 million jobs since 2019 (a 12.3% increase), GDP per employed worker decreased by 0.3% over the same interval.

Housing supply and price moderation

Housing market dynamics continue to reflect a severe gap between demand and new construction. Home prices are projected to rise by 11.5% in 2026 and 5.5% in 2027, yielding a cumulative increase of 17.6% across the two years. Residential construction investment has weakened over the past nine months, prompting BBVA Research to lower its delivery forecast from between 140,000 and 160,000 completed homes down to between 130,000 and 140,000 across 2026 and 2027. Chief economist Miguel Cardoso explained that property prices have outpaced deflated household income levels, curbing purchasing capacity and contributing to an eventual slowdown in transaction volumes.

Cardoso addressed the demographic distribution of price pressures during the presentation.

The price increase above income is mainly affecting relatively young age groups.