The Spanish research foundation Funcas expects, according to its updated forecast of 15 October 2026 a marked slowdown in economic activity from 2027. The institute confirms real growth of around 2.5 per cent for 2026 and expects about 1.8 per cent for 2027. Funcas also estimates average inflation of about 3.7 per cent in 2026 and around 3.1 per cent in 2027. In the institute’s view, this creates an unfavourable combination of slower growth and relatively high Inflation, which reduces purchasing power for households and dampens domestic demand .
The analysts cite three main factors: first, continued external price pressures, particularly through energy imports; second, higher interest rates in the euro area, which weigh on financing and investment; and third, a gradual weakening of domestic momentum, as the wage-price relationship provides less impetus and employment growth loses pace. According to Funcas, price pressure is not solely imported: a domestic contribution to inflation is keeping price rises above the pre-crisis trend and undermining competitiveness.
Recent official data support this assessment. The National Statistics Institute INE reported a higher year-on-year consumer price index for September 2026. Inflation therefore remains at a level that continues to put pressure on real wages and consumption. This development is particularly relevant to the forecast because it means 2027 begins from an already high starting point.
The Bank of Spain sees heightened risks to price stability in recent reports and points to possible second-round effects. This is consistent with Funcas’s warning that medium-term growth prospects could suffer without additional productivity gains and a carefully calibrated fiscal and labour-market policy. Which measures would be suitable remains politically contentious; any related announcements and their effects should be treated as forecasts and assessed separately.
By European standards, Spain will remain a strong-growing economy in 2026, according to various international assessments. However, the path outlined by Funcas suggests that the growth gap will narrow in 2027 if inflation falls only slowly. For businesses, this means tighter margins and continued selection based on productivity and cost structure; for households, stabilising real incomes is the priority.
Editor: Daniel Mayer (Article created with AI assistance).