The Bank of Spain cuts its growth forecast for 2025 by three-tenths.

MadridThe Bank of Spain has cut its forecast for Spanish gross domestic product (GDP) growth for 2025 by three-tenths to 2.4%, while lowering its 2026 estimate by one-tenth to 1.8%, amid a context marked by tariffs and geopolitical uncertainty. This was announced by the Governor of the Bank of Spain, José Luis Escrivá, during his speech this Monday in the Congress of Deputies.

Although the bank is scheduled to publish its full report on macroeconomic projections tomorrow, June 10, Escrivá wanted to advance its forecasts for the Spanish economy, which is currently marked by high uncertainty and an "extraordinarily complex" environment. Spain's direct trade exposure to the United States is limited and lower than that of other major European Union economies, although indirect exposure is higher in some sectors, such as the chemical sector, due to the economy's integration into global value chains.

For this reason, the Bank of Spain warns that in a more adverse scenario, with a prolonged tariff escalation, the Spanish economy's growth rate would be reduced by 0.4 percentage points in 2025 and by 0.7 percentage points in 2026 compared to the baseline scenario. The Governor explained that the Spanish economy is experiencing a growth slowdown from rates above 3% to a rate of around 2.5% in the first half of 2025. The main factor behind the slowdown is the decrease in the contribution of the foreign sector.

Furthermore, according to the Bank of Spain survey, uncertainty is the main factor affecting companies. 30% of companies report being affected by tariffs, and 80% of those affected say uncertainty is a significant factor.

The Bank of Spain's new forecasts point to an average headline inflation rate of 2.4% in 2025, one-tenth lower than projected in March. Regarding the labor market, the bank maintained its forecast for the unemployment rate in 2025 at 10.5%, although it raised its projection for 2026 by two-tenths compared to the previous report, to 10.2%. On the fiscal front, the institution has maintained its estimates for the public deficit in 2025 and 2026 at 2.8% and 2.6%, respectively.

During his speech in the Congress of Deputies, the Governor of the Bank of Spain disassociated the resignation of the bank's Director of Economics, Ángel Gavilán, from the presentation of the bank's annual report, which made no reference to the pension reform, which Escrivá himself spearheaded when he was Minister. José Luis Escrivá lamented Ángel Gavilán's departure and asserted that the resignation "has nothing to do" with the annual report.

Escrivá pointed out that, as Gavilán himself explained, his resignation at this time has nothing to do with the annual report. "I am delighted with Mr. Gavilán. I would not have wanted Mr. Gavilán to have left," the Governor noted during his speech.

Escrivá argued that the director general of economics wanted "new professional horizons" and waited, at Escrivá's request, until he presented the annual report and macroeconomic projections—which will be published tomorrow—to make his departure. "I asked him to complete it so we could start from there," the governor said.

On May 21, after the presentation of the annual report, Gavilán officially announced his intention to leave his position as head of the Bank of Spain's director general of economics, a decision that will take effect on June 12, just two days after he presents the agency's new estimates.

Escrivá recalled that he has now opened an international process for the best candidates to apply for the position of new director general of economics, who will be chosen by a panel of "three highly prestigious economists." "I believe this is institutional quality. When you face new situations, what you should do is try to use international best practices, and that's what we're always trying to do," he emphasized.