CaixaBank: the Spanish one will continue to be the European economy that will grow the most

BarcelonaDespite inflation and higher interest rates, the Spanish economy will continue to be the fastest-growing European economy next year. This is the forecast from CaixaBank Research's perspectives for 2027. The bank's research department estimates, presented this Monday, point to a rise in the gross domestic product (GDP) of 2% next year, compared to 2.6% in the current year; and 1.4% for the eurozone (1% in 2026), as explained by Enric Fernández, Chief Economist at CaixaBank.

The report highlights the "resilience" of the Spanish economy which, in any case, will slow its pace of growth compared to 2026 due to being in a more advanced phase of the cycle, suffering from higher interest rates, and a lower contribution from other elements that until now contributed more, such as European funds, explained Fernández. However, CaixaBank has revised upwards the forecasts that were 2.4% at the beginning of the year, and even 2.1% once the war with Iran began.

Oriol Aspachs, Director of the Spanish Economy at CaixaBank Research, explained that the resilience is based "on the solidity of the financial position of the Spanish economy, with low household debt (41% of GDP, and 50% in the eurozone), although public debt is relatively high, but this year it will close "slightly below 100% of GDP thanks to a deficit that has been corrected".

Another positive element is the dynamism of domestic demand and exports, especially of services. Furthermore, European funds, the schedule for which ended in August, continue to have projects being applied. On the side of risks is the real estate sector, with a housing deficit that continues to pressure prices upwards and productivity growth, which should improve for growth to be sustainable in the long term, according to Aspachs.

Inflation of 3.4%

The CaixaBank research department expects energy prices to moderate, which will lead to an improvement in inflation, which is expected to close this year at an average of 3.4%, after having reached 4.9%. In this context, two interest rate hikes by the European Central Bank (ECB) are expected, from the current 2.5% to reach 3%, after a period in which, with the outbreak of the war in Iran and the impact on energy prices, more hikes were initially expected.

Oriol Carreras, an economist at CaixaBank Research and author of the report, explained that the main growth drivers continue to be the population, which is increasing well above what it did before the pandemic; and European funds, which will still add two tenths to growth, half as much as in 2026. And lower inflation and a gradual acceleration of investment in residential construction.

On the other hand, the main brakes will be lower growth in the main export markets or higher interest rates, and also the indirect impact of energy prices, which is a more gradual process with more impact in 2027 than in 2026, Carreras stated.