Spain’s economy growth will slow in response to global uncertainty and structural challenges, says Esade

The Spanish economy is currently remarkably robust in the European scenario, but growth is expected to flatten in the coming months due to increasing global geopolitical and financial uncertainty, in addition to domestic structural issues, such as the challenging housing market, high public deficit and competitiveness even lower than the European average. This is one of the main findings of the Esade Economic and Financial Report, edited by Toni Roldán, director of EsadeEcPol, and published in conjunction with Banc Sabadell. The chapter about the economic landscape is by Esade professor Josep M. Comajuncosa, and Manuel Hidalgo, professor at Pablo de Olavide University and a senior fellow at EsadeEcPol. 

The authors of the report outline the six key factors that have underpinned Spain’s robust growth in recent months: demographic upturn, good export  performance, upbeat financial circumstances of families and companies, interest rate normalization, and public investment related to EU European Next Generation funds. Mention is also made of the positive impact of lower energy prices thanks to the growth of renewables making industry more competitive.

These factors mean that the short- and medium-term outlook of the Spanish economy remains positive, with growth of 2.4% to 2.6% forecast for 2025, depending on the source. However, growth is expected to gradually decline due to global uncertainty and the fallout of the Trump administration’s new tariff policies. The report’s authors mention two particular threats: the tariffs levied on specific industries (olive oil, cars and tiles) and the likelihood of global financial instability, which could send the Spanish risk premium higher. 

Structural challenges: housing, deficit and productivity

The report warns that, besides circumstantial factors, certain structural imbalances that could curtail the robust growth of Spain’s economy still exist, particularly the widening gap between demand and supply in the housing market, with prices up 12.3% in the first quarter of 2025. This is in addition to a structural deficit of more than 3% of GDP and productivity which, despite recent improvements in innovation and digitalization, lags behind the European average.

Similarly, the migratory flows that boosted economic growth and helped meet labor market needs now pose new challenges in terms of social integration, overwhelmed infrastructures and strain on the property market. The report underlines the need for effective public policies able to maximize the positive impact of this demographic scenario.

Downward revision of global growth

At the global level, the authors of the Esade Economic and Financial Report point out that the world economy is once again experiencing difficulties since the start of Donald Trump’s second mandate, just when it seemed to have stabilized in the wake of the pandemic, the war in Ukraine and the upturn in inflation. Growing trade uncertainty, geostrategic tensions and the fragility of financial markets have resulted in a widespread revision of growth forecasts for 2025.

Advanced economies 

The growth of advanced economies is set to fall to 1.2% (seven points lower than in January), whilst growth in emerging and developing economies is expected to drop from 4% to 3.3%. In the United States, the drop is even greater, from 2.7% to 1.5%. Meanwhile, growth will remain moderate in the eurozone (falling from 1% to 0.7%), except in Spain, Portugal and Ireland with positive growth rates.

International co-operation and targeted industrial policy

In response to uncertainty, the authors say that international cooperation and increased economic integration between blocks of countries could help uphold and improve international trade, either by means of non-discriminatory, unilateral alliances or within the framework of multilateral trade agreements. They do, however, warn that this focus on industry must specifically target sectors with well-defined externalities and market failures because, otherwise, they might cause countries to stray from their underlying competitive edge and cause a regional or global oversupply.

Contributors to the 37 edition of the Esade Economic and Financial Report, published with the support of Banc Sabadell, include Elina Ribakova, senior researcher at the Peterson Institute for International Economics, and vice president of Foreign Policy and director of the International Affairs Program at the Kiev School of Economics, who penned the article “Global economic governance in the process of transformation: Europe’s decisions”; Federico Steinberg, Prince of Asturias Professor at Georgetown University and Head Researcher at the Elcano Royal Institute, author of “The European Union and the second Trump administration”, and Eduardo Morales, professor at Princeton University, with “The new trade policy”. The discussion section ends with the article by Carolina Villegas, professor in the Esade Department of Economics, Finance and Accounting, “Reconfiguration of value chains in response to new trade tensions: adapting to a fragmented world.”