IMF Executive Board Concludes 2025 Article IV Consultation with Spain
IMF News, June 6, 2025
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- Published: June 6, 2025
Economic performance and near-term outlook
- Spain’s growth: 3.2 percent in 2024, one of the fastest-growing in the euro area.
- Growth drivers: robust services exports (tourism and non-tourism services) and labor force growth, including migration inflows well above pre-pandemic levels.
- GDP per capita gains have been more modest because high GDP growth was accompanied by high employment growth.
- Projections:
- Growth projected at 2.5 percent in 2025.
- Growth projected at 1.8 percent in 2026.
- Growth projected at 1.7 percent in 2027.
- Inflation: projected to decline further and return close to the ECB’s target by end-2025.
- External position: preliminarily assessed to be stronger in 2024 than implied by medium-term fundamentals and desirable policies, amid strong exports and still subdued imports.
Executive Board assessment and risks
- Main assessment: Spain continues to outperform the euro area, but per-capita income gains are modest; employment rate remains one of the lowest in Europe.
- Key downside risks:
- Further escalation of trade measures, particularly those involving the EU.
- Domestic political fragmentation that could hamper fiscal responses and raise sovereign risk concerns.
- A weaker global environment (including elevated trade policy uncertainty and US tariffs) weighing on external demand.
- Gradual slowdown in net migration and demographic aging, which will weigh on labor force gains.
- Contingent policy stance: Fiscal policy should remain flexible; let automatic stabilizers operate. Temporary discretionary support only for severe shocks and provided sovereign funding costs remain low.
Fiscal policy, debt dynamics, and recommendations
- Current fiscal projections (staff baseline without further consolidation beyond existing measures):
- Deficit would stabilize above 2 percent of GDP by 2030.
- Debt-to-GDP ratio would remain above 90 percent before rising again in the longer term as aging-related fiscal pressures intensify.
- Recommended consolidation:
- Frontload the authorities’ planned 3 percent of GDP adjustment over 2025-2029 rather than 2025-2031.
- This effort would require about 2 percentage points of GDP in new measures.
- Underpin the effort with an enhanced medium-term fiscal plan that lays out well-identified tax increases and spending reduction priorities.
- Harmonizing VAT and enhancing environmental taxation are identified as measures that would deliver the recommended effort while reducing economic distortions.
- Pensions:
- Additional measures should address fiscal pressures from rising future pension expenditures.
- Improve the pension system’s safeguard clause.
- Prioritize employment-friendly pension reform options given the widening projected gap between pension expenditures and social security contributions.
- Existing measures already included in baseline:
- Social security contribution increases from the 2021-2023 pension reforms.
- Non-indexation of PIT brackets.
- These amount to about 1 percent of GDP overall over 2025-29.
Financial sector resilience and housing
- Systemic risks: assessed as low; banks are well-capitalized, liquid, and profitable, though capital ratios are still somewhat below euro area peers.
- Household and corporate balance sheets: sound, supported by low debt and rising incomes.
- Housing:
- Rapid growth in house prices has eroded affordability.
- Primary remedy: measures that stimulate housing supply.
- Pre-emptive borrower-based measures should be considered if early signs of easing in lending standards appear.
- Macroprudential policy:
- Support for ongoing phasing-in of the one-percent positive neutral CCyB.
- Encourage continued implementation of 2024 FSAP recommendations to further enhance resilience.
Labor market, productivity, and structural reforms
- Unemployment: remains the highest in the euro area at about 11 percent (2024 rate).
- Employment rate: despite progress, Spain still has one of the lowest employment rates in Europe.
- Productivity gap:
- Spain’s (hourly labor) productivity gap vis-à-vis the euro area remains about as wide as it was 25 years ago.
- Closing the gap requires measures to facilitate firms’ scaling-up and strengthen innovation.
- Recommended reforms:
- Enhance activation policies and financial incentives for jobseekers to durably reduce unemployment to single digits.
- Carefully design the planned reduction of the working week in the private sector to mitigate adverse effects on output and workers’ incomes; major role for collective bargaining including in setting level and remuneration of overtime.
- Complete both the Spanish and EU single markets for goods and services.
- Streamline firm size–related tax and regulatory thresholds.
- Boost venture capital via progress toward the CMU complemented by domestic incentives.
- Promote excellence in higher education through greater autonomy and performance-based funding of universities.
Key statistics and selected economic indicators (annual percent change unless noted)
- Demand and supply in constant prices:
- Gross domestic product: 6.2 (2022), 2.7 (2023), 3.2 (2024), 2.5 (2025), 1.8 (2026), 1.7 (2027)
- Private consumption: 4.8 (2022), 2.9 (2023), 2.1 (2024), 2.0 (2025), 1.9 (2026)
- Public consumption: 0.6 (2022), 5.2 (2023), 4.1 (2024), 3.5 (2025)
- Gross fixed investment: 3.3 (2022), 3.0 (2023), 5.0 (2024), 1.2 (2025)
- Total domestic demand: 3.9 (2022)
- Net exports (contribution to growth): 0.4 (2022), -0.2 (2023), -0.1 (2024), 0.0 (2025)
- Exports of goods and services: 15.0 (2022), 3.4 (2023), 2.2 (2024), 3.1 (2025)
- Imports of goods and services: 7.8 (2022), 2.6 (2023)
- Potential output: 2.3 (2022)
- Output gap (percent of potential): 1.1 (2022), 1.6 (2023), 0.7 (2024)
- Prices:
- GDP deflator: 4.7 (2022), 2.4 (2023)
- Headline Inflation (average): 8.3 (2022)
- Headline Inflation (end of period): 5.5 (2022), 2.8 (2023)
- Core inflation (average): 5.8 (2022)
- Core inflation (end of period): 6.7 (2022), 4.0 (2023)
- Employment and wages:
- Unemployment rate (percent of total labor force): 13.0 (2022), 12.2 (2023), 11.3 (2024), 11.1 (2025), 11.0 (2026)
- Labor costs, private sector: 5.6 (2022)
- Employment: 3.6 (2022), 1.3 (2023), 0.9 (2024)
- Balance of payments (percent of GDP):
- Current account balance: (table header present; no numeric entries beyond description)
- Net international investment position: -57.7 (2022), -51.3 (2023), -44.0 (2024), -38.5 (2025), -33.5 (2026), -29.7 (2027)
- Public finance (percent of GDP):
- General government balance: -4.6 (2022), -3.5 (2023), -3.2 (2024), -2.8 (2025), -2.4 (2026), -2.3 (2027)
- Primary balance: -2.5 (2022), -1.7 (2023), -1.3 (2024), -0.6 (2025), 0.1 (2026)
- Structural balance: -5.3 (2022), -4.1 (2023), -3.1 (2024), -2.7 (2025)
- General government debt: 109.4 (2022), 105.0 (2023), 101.8 (2024), 100.7 (2025), 99.1 (2026), 97.7 (2027)
- Note: The projections incorporate spending financed by the EU Recovery and Resilience Facility (including the grant and the loan component) amounting to about 0.7, 1.7, 1.3 and 0.3 percent of GDP from 2024 to 2027.
IMF Executive Board Concludes 2025 Article IV Consultation with Spain — Press Release No. 25/183 (June 6, 2025).
