The Spanish economy maintains growth despite the first effects of the war in Iran

BarcelonaThe Spanish economy maintained its growth in the first quarter of this year despite the initial effects of the war in the Persian Gulf, with household consumption and business investment as the driving forces.

Thus, the State's gross domestic product (GDP, the indicator that measures the size of an economy) increased by 0.6% compared to the previous quarter, according to data advanced this Thursday by the National Statistics Institute (INE). This represents a reduction in the quarterly growth rate of two tenths compared to that registered in the last three months of 2025. Compared to the first quarter of last year, growth was 2.7%, one tenth higher than the year-on-year rate of the fourth quarter of last year.

The last month of the first quarter was marked by the attack by the United States and Israel on Iran, which particularly affected global energy markets and further increased uncertainty. Despite this, and despite the slowdown, Spanish growth rates continue to be clearly higher than those recorded by most countries in the European Union.

"The Spanish economy maintains its growth momentum at the start of this year marked by the war in Iran," declared the vice-president of the government and Minister of Economy, Carlos Cuerpo, in a message to the media. Cuerpo described the GDP growth as "solid" and pointed out that "at this pace," Spain continues to be "leading [economic growth] among the main economies of the European Union."

Cuerpo also celebrated the rise in productivity per hour worked, which grew by 1% in the first three months of the year and stood 0.6% above the beginning of the previous year. According to the minister, this increase is "the best figure" in a year and a "good sign" of the positive evolution of the Spanish economy, which – in his opinion – is "consolidating an unusual cycle of increased productivity and record job creation." However, despite Cuerpo's positive words, if looking at full-time employment, productivity fell by 0.1% compared to the fourth quarter and by 0.2% over twelve months.

Indeed, low productivity compared to neighboring countries has been the major pending issue of the Spanish economy in general, but also the Catalan one, for decades. In the case of Catalonia, some economic entities, like the Chamber of Commerce of Catalonia, point out that there are signs of a change in economic model less concentrated in low-productivity activity and, therefore, low added value –tourism, retail trade, or some industries like the meat industry–, in favor of sectors such as pharmaceuticals, biotechnology, or information technologies, which have much higher productivities.

Consumption and investment pull the cart

Of the 0.6 growth points compared to the fourth quarter, economic activity within the State represented 0.4, while the external sector contributed 0.2. Household consumption was the main driver of growth, with an increase of 0.6% in relation to the last three months of 2025 and 3.2% year-on-year. Public administration spending also grew, in this case by 0.2% quarterly and 2% annually.

For a year now, investment has been one of the main driving forces of GDP. The first quarter grew a modest 0.1% compared to the previous quarter, but stood 5.8% above year-ago levels.

The international situation, marked by uncertainty and the energy crisis derived from the war in the Middle East, fully impacted goods exports, which fell by 0.5% on a quarterly basis, but still closed March in positive territory compared to the first quarter of 2025, with an increase of 0.9%.

Imports also fell, in this case by 1.2% quarterly, but increased by 3.1% annually. It is common for the purchase of foreign products to increase when an economy grows, as domestic production cannot meet the increased demand.

Robust industry growth

By sectors, industry grew by 0.4% compared to the previous quarter (1.8% compared to a year ago) and within this, the manufacturing sector increased its quarterly growth by four tenths, to 0.5%. Construction increased activity by 0.1%, but compared to the first quarter of 2025, it registered an increase of 6.5%. Agriculture, on the other hand, decreased by 3.4% compared to a year ago despite growing a remarkable 3.3% compared to the fourth quarter of last year.

For their part, services, which represent more than two-thirds of GDP, lost momentum in the first quarter, with a quarterly decrease in activity of 0.7%, a common occurrence in the first quarter after a fourth quarter normally marked by increased consumption during Christmas. Despite this, services increased activity by 3.4% compared to a year earlier.