Lorraine Williamson
Why is Spain consistently outperforming the rest of the Eurozone while much of Europe edges along at a modest pace? A new OECD assessment suggests the country is entering 2026 with more momentum than previously thought – and that the engine behind it lies closer to home than global markets.
The latest update from the Organisation for Economic Co-operation and Development once again upgrades Spain’s prospects. The OECD now expects 2.9% GDP growth in 2025, a notable step up from earlier calculations. The outlook for 2026 has also improved, rising to 2.2%. It places Spain well ahead of the Eurozone average and reinforces a pattern seen since the post-pandemic recovery began: domestic confidence is proving remarkably resilient.
A domestic engine powering ahead
Instead of relying on external demand, Spain’s current expansion is being driven by households and firms at home. Consumer spending continues to rise, helped by a labour market that has held steady in the face of global uncertainty. Employment is strong; real wages have improved; and inflation has retreated far enough to give families some breathing space. All of this feeds back into the economy, strengthening the cycle.
Investment is expected to build on that foundation. Lower financing costs and the ongoing rollout of Spain’s recovery and transformation plan – a multi-year effort focused on modernising infrastructure, digitalising the economy, and supporting greener industries – are giving companies clearer incentives to spend.
Where the brakes might be applied
The OECD is clear about the weaker side of the equation. External demand is losing pace as Spain’s major partners, particularly Germany and France, struggle to shake off sluggish growth. Geopolitical tensions add another layer of unpredictability, pushing firms to be cautious with export-led strategies. Even with Spain’s positive momentum, the country will feel any further cooling in European demand.
Why the labour market still matters
One of the strongest threads in the OECD’s analysis is the continued strength of employment. Job creation remains high, and this sense of security is filtering through to household decisions. Higher real incomes help maintain demand for services and durable goods, supporting sectors that have historically been vulnerable during downturns. As long as inflation stays contained, the OECD expects this dynamic to remain a stabilising force.
Long-standing challenges that won’t disappear overnight
Yet Spain’s economy is not free from structural risks. Housing affordability remains a deep concern, especially in major cities and coastal regions where supply is constrained and competition is fierce. The OECD also flags pressure on the public budget. Rising expenditure on pensions, healthcare and defence is expected to strain public finances in the coming years. These issues risk eroding some of the momentum unless reforms are sustained.
Standing out in a slower Europe
The Eurozone forecasts place Spain in sharp contrast with its neighbours. The region is expected to grow by around 1.4% in 2025, barely half the Spanish rate. Even in 2026, when Spain’s pace moderates, it will remain ahead of the European average. The country’s comparatively strong rebound speaks to the combined effect of employment stability, consumer confidence and ambitious investment policies.
Spain´s economy stays strong
Reform, resilience and the wider global picture
As the global economy adjusts to slower demand, higher geopolitical risk and volatile energy prices, Spain’s resilience stands out. The OECD acknowledges these uncertainties but stresses that the country’s internal dynamics are currently powerful enough to carry it through. Delivery remains key: if the government’s recovery plan continues to be implemented effectively, the supportive effect on growth should hold.
What this means for 2026
Spain enters the new year with rare momentum for a major European economy. Strong domestic demand, healthier household finances and an active investment strategy give it a solid footing. The risks lie largely outside its borders, yet the OECD’s revision shows confidence that Spain’s internal engines will keep running.
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