IMF Executive Board Concludes 2026 Article IV Consultation with Spain
IMF News, May 22, 2026
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- Published: May 22, 2026
Overview and Executive Board Assessment
- Spain’s economy continued to outperform the euro area despite the adverse impact from the war in the Middle East.
- Growth is projected to remain solid near term but gradually ease over the medium term as immigration slows and population aging intensifies.
- Risks to growth are mainly on the downside; risks to inflation are on the upside.
- Executive Directors commended Spain’s strong performance, welcomed resilient near-term growth, and emphasized the need to rebuild fiscal space and advance structural reforms.
Recent Performance and Near‑term Outlook
- Real GDP growth: 2.8 percent in 2025.
- Projected GDP growth: 2.1 percent in 2026, 1.8 percent in 2027.
- Growth drivers in 2025–2026:
- Pickup in domestic demand and investment offset subdued net exports.
- Strong immigration underpinned labor force gains.
- Unemployment declined slightly.
- Productivity growth stronger than prior to COVID-19.
- Short‑term consumption support: continued strong immigration, tight labor market, and normalization of the still high saving rate.
- Investment support: final year of NGEU funding and firms’ intangible investment plans.
- Medium‑term projection: growth settles around potential rate of around 1.7 percent as immigration slows and employment rate remains stable.
Inflation and Prices
- Headline inflation: hovered around 2.5–3 percent before the war in the Middle East due to persistent core and services inflation.
- Projected inflation path:
- Inflation at 3 percent by end-2026.
- Decline to 2.2 percent in 2027.
- Large share of renewables in the electricity mix is dampening inflationary impact of higher gas prices.
- Directors noted risks that a prolonged Middle East conflict could make inflation stickier.
Fiscal Policy and Recommendations
- Fiscal outcome: deficit narrowed to 2.4 percent of GDP in 2025.
- Staff recommendation: accelerate discretionary consolidation to rebuild fiscal buffers given still strong growth and looming sharp rise in aging-related spending pressures.
- Specific fiscal measures recommended by staff and Directors:
- Discontinue recent energy support measures, except under a severe scenario—then only narrowly targeted, non-price-distorting support.
- Consider further pension reform.
- Harmonize VAT rates while protecting vulnerable households.
- Implement a fully‑fledged medium‑term fiscal strategy.
- Reinforce the role of the independent fiscal council.
- Align subnational fiscal rules with the EU fiscal framework.
Labor Market, Productivity, and Structural Reforms
- Employment challenges:
- Employment rate remains one of the lowest in the euro area despite recent progress.
- Speed of demographic aging is one of the fastest among peers.
- Productivity: recent pickup noted but still recent.
- Recommended structural measures:
- Strengthen active labor market policies.
- Facilitate firms’ scaling‑up and innovation.
- Redesign the R&D tax credit.
- Address skills mismatch.
- Reduce remaining barriers to trade across Spanish regions and EU countries.
Financial Stability and Housing
- Overall systemic financial risks: assessed as low; households, corporates, and banks in good financial health.
- Risks identified:
- Continued rise in house prices and early signs of easier lending standards could foster financial vulnerabilities if sustained.
- Policy recommendations:
- Introduce mortgage-related borrower‑based measures, at least in the form of supervisory guidance, in the coming year; continue analysis on design and calibration ahead of implementation.
- Continue progress on implementing remaining FSAP recommendations.
- Decisive action to boost housing supply: accelerate urban development, simplify permitting, and reduce legal uncertainty.
Key Quantitative Indicators (selected)
- Real GDP growth: 3.5 (2024), 2.8 (2025), 2.1 (2026), 1.8 (2027), [2028 not in same row].
- Private consumption: 3.1 (2024), 3.4 (2025), 2.5 (2026), 2.2 (2027), 1.9 (2028).
- Public consumption: 2.9 (2024), 2.4 (2025), 2.3 (2026), 1.5 (2027), 1.6 (2028).
- Gross fixed investment: 3.6 (2024), 5.8 (2025), 4.1 (2026), 1.7 (2027).
- Total domestic demand: 3.7 (2024), (2025 value omitted in source table).
- Net exports (contribution to growth): 0.3 (2024), -0.6 (2025), 0.0 (2026), 0.1 (2027).
- Exports of goods and services: 3.2 (2024), 2.0 (2025), 2.7 (2026).
- Imports of goods and services: 6.2 (2024), 4.0 (2025).
- Output gap (percent of potential output): 0.7 (2024), 1.2 (2025), 0.8 (2026), 0.4 (2027), 0.2 (2028).
- GDP deflator: 3.0 (2024).
- Headline inflation (average): 2.6 (2024).
- Headline inflation (end of period): (values for 2025–2028 given in narrative: 3 percent by end-2026, 2.2 percent in 2027).
- Core inflation (average) and core inflation (end of period): (values listed in source table but numeric entries omitted in provided extract).
- Unemployment rate (percent of total labor force): 11.3 (2024), 10.5 (2025), 9.8 (2026), 9.9 (2027).
- Labor costs, private sector: 4.7 (2024), 4.3 (2025).
- Employment: 0.6 (2024), 0.5 (2025).
- Current account balance (percent of GDP): (value omitted in provided extract).
- Net international investment position: -41.0 (2024), -44.8 (2025), -39.1 (2026), -35.2 (2027), -31.6 (2028).
- General government balance (percent of GDP): -3.2 (2024), -2.4 (2025), -2.3 (2026), -2.2 (2027).
- Primary balance: -1.4 (2024), -0.5 (2025), -0.2 (2026), -0.1 (2027).
- Structural balance: -2.8 (2024), -2.5 (2025).
- General government debt: 101.6 (2024), 100.7 (2025), 98.6 (2026), 96.6 (2027), 94.6 (2028).
Source: IMF — IMF Executive Board Concludes 2026 Article IV Consultation with Spain (May 22, 2026).