The IMF lowers its growth forecast for Spain to 2.1% in 2026 due to the war in Iran
The organization believes that the conflict will affect the State mainly due to the increase in oil prices.
BarcelonaThe International Monetary Fund (IMF) has revised its growth forecasts for the Spanish economy downwards for 2026 and 2027 following the war in Iran. Specifically, it expects GDP growth to moderate this year to 2.1% from 2.8% in 2025, a downward revision of two-tenths of a percentage point compared to the forecast last January. For 2027, it anticipates growth of 1.8%, one-tenth of a percentage point lower than previously projected. However, according to the organization, economic growth will remain robust in the short term, despite the expected adverse impact related to the conflict in the Middle East. Beyond 2027, the institution expects annual GDP growth to stabilize around its medium-term potential of approximately 1.7%. Regarding the year-on-year headline inflation rate, IMF staff estimate it will reach approximately 3% by the end of 2026, before falling to 2.2% by the end of 2027. This baseline scenario assumes that oil and gas prices will generally be linked to futures prices. It also anticipates that the conflict in the Middle East will negatively affect the Spanish economy, "mainly due to rising oil prices." Meanwhile, the impact of rising gas prices "should be mitigated by several factors, primarily the large proportion of renewable energy in Spain's electricity mix."
Inflation and Risks
The IMF also expects domestic demand to remain the main driver of growth, partially offsetting the moderation of supply-side factors, such as the increase in the working-age population, and demand, in the case of tourism, in recent years. They also anticipate that private consumption will continue to be sustained by the continued rise in wages in a still-dynamic labor market, and by a continued decline in the savings rate, which will allow Spanish households to mitigate the impact of the energy shock. Meanwhile, investment will benefit from the final year of the Next Generation EU funds and the ongoing economic recovery.
"While there are some domestic upside risks, overall risks to the outlook are tilted mostly to the downside," the IMF notes, warning that a prolonged conflict in the Middle East could lead to a more sustained increase in energy prices. Under the most severe conditions, this would weigh on investment, consumption, and growth, while also potentially triggering larger second-round effects on wages and inflation, keeping headline inflation above 3% for some time.
In addition to the crisis triggered by the US and Israeli attack on Iran and the Persian country's response, the institution points out that the escalation of other geopolitical tensions and trade measures is another significant external risk for Spain and the global economy.
