Spain stays eurozone's fastest-growing major economy in 2026, OECD says, but inflation sticks near 3%

Growth outlook

Spain's economy is set to expand by 2.2% in 2026, the OECD said in its latest Economic Outlook, revising the figure up by one-tenth of a percentage point from its March estimate. That pace is almost three times the 0.8% projected for the eurozone as a whole and far ahead of Germany (0.7%), France (0.7%) and Italy (0.5%). Among major advanced economies, only South Korea is expected to grow faster this year, at 2.6%. The OECD left its 2027 forecast for Spain unchanged at 1.7%, still well above the 1.2% eurozone average.

The upgrade follows a stronger-than-expected first quarter, when Spanish GDP rose 2.7% year-on-year. The OECD's central scenario assumes the Middle East conflict ends in June, limiting the energy-price shock to the second quarter. The European Commission is slightly more optimistic, forecasting 2.4% growth in 2026, while the Spanish government's own projection matches the OECD's 2.2% for this year but is higher for 2027, at 2.1%.

Spain is the only large eurozone economy whose forecast improves for this year.

Drivers of expansion

Domestic demand remains the engine. Private consumption is supported by job creation and rising real wages, while investment is getting a lift from EU-funded projects. Social Security affiliations rose 2.4% year-on-year in April. The OECD expects private investment to grow 4% and private consumption 2.6% in 2026. Exports, by contrast, will be a drag in a tense geopolitical environment.

Labour market

Employment continues to strengthen. The OECD sees the unemployment rate edging down from 10.5% in 2025 to 10.2% in 2026 and 9.8% in 2027. That is a slower decline than the Spanish government expects; Madrid forecasts the jobless rate will drop below 10% already this year and reach 9.5% in 2027.

Inflation and energy

Higher energy costs from the Middle East war will push Spain's harmonised inflation rate to 3.3% in 2026, up from 2.7% in 2025, before easing to 2.9% in 2027. The OECD's inflation projection for 2026 is three-tenths higher than in March, and the 2027 figure is seven-tenths higher. Food inflation is not expected to peak until late 2026 or early 2027. The Bank of Spain is more sanguine, forecasting 3% inflation in 2026 and 1.7% in 2027.

Fiscal position and policy response

The government's temporary support package, valued at €5 billion (0.3% of GDP), includes fuel-tax cuts and other measures to cushion the impact of the war. The OECD acknowledges the package acts as a buffer but argues it should be better targeted at vulnerable households and kept strictly temporary. The organisation also urges Madrid to reduce the deficit faster. It projects the deficit at 2.2% of GDP in both 2026 and 2027, with public debt falling below 100% of GDP this year (98.5%) and continuing to decline to 97.3% in 2027.

The measures should be more selective, not general, and directed at vulnerable households.