The Bank of Spain has updated its economic projections, revising the outlook for the economy’s performance. The report provides a comprehensive view of how the nation’s output, prices and public finances are expected to evolve, serving as a key reference for understanding the current economic trajectory.
The report raised the Bank of Spain’s estimate for gross domestic product growth in 2026 to 2.6 percent, up from the 2.3 percent that had been projected in June of the previous year. This upward revision reflects the bank's updated assessment of economic performance relative to earlier estimates.
Accompanying the higher growth outlook, the bank warned that inflation is set to accelerate. Consumer prices are forecast to reach 3.9 percent in 2026 and to remain elevated at 3.7 percent in 2027. Both numbers exceed the earlier estimates that had been circulating, indicating that price pressures are proving more persistent than anticipated. The bank attributed this trend to two main forces: disruptions in energy markets that have kept fuel and electricity costs volatile, and ongoing upward pressure from services sector prices, which tend to be stickier than goods.
On the spending side, the bank forecast that net public spending will grow by 7 percent in 2026.
The projection also showed that the public deficit is expected to rise to 2.6 percent of GDP. This figure indicates an increase in the projected fiscal imbalance for the coming period.
On the spending side, the bank forecast that net public spending will grow by 7 percent in 2026. This pace markedly exceeds the 4.8 percent increase recorded in 2025, suggesting a notable acceleration in the outflow of funds for public programs, investments or transfers.
To explain the inflation outlook, the bank highlighted that energy market disruptions have created uncertainty around the cost of power and fuel, which feeds directly into household and business expenses. At the same time, persistent cost pressures in the service sector—covering everything from hospitality to professional services—have kept upward pressure on prices even when goods prices stabilize. These two dynamics together form the core of the bank’s inflation narrative.
In an effort to cushion the impact of rising energy prices, the government has implemented targeted tax cuts on electricity and gas. According to the bank’s calculations, these measures have saved households approximately 3.675 billion euros. The figure represents the aggregate amount of money that consumers have retained thanks to lower levies on their utility bills, providing a direct offset to the inflationary squeeze on purchasing power.
Taken together, the Bank of Spain’s latest numbers paint a picture of an economy that is growing a bit faster than previously thought but doing so amid higher inflation, a widening fiscal gap and a noticeable acceleration in public spending. The tax cuts on energy offer tangible relief to families, mitigating the impact of rising costs.