Economic Growth in Spain
The Bank of Spain has raised its outlook for economic growth in the country, predicting a 2.9% expansion in 2025. This is up from the previous forecast of 2.6%, and the bank also expects growth of 2.2% in 2026 and 1.9% in 2027. This growth is supported by strong domestic demand, a rebound in tourism, and the influx of European recovery funds.
Strong Economic Performance
Spain’s economy is performing well compared to the rest of the euro zone, driven by population growth and a boost in consumption and labor supply. The central bank expects activity to have expanded by 0.6-0.7% in the final quarter of this year, matching the pace seen over the summer months. Inflation is also expected to ease, dropping to 2.1% in 2026 and 1.9% in 2027 from an estimated 2.7% this year.
The Struggle is Real for Many Households
However, despite the strong economic performance, many households in Spain are struggling to cope with higher living costs. Food bills are a significant concern, and wages have yet to keep up with inflation. Millions of households feel poor, and the question is not whether inflation is easing, but whether pay is catching up. Higher food and housing prices, slow real wage recovery, and a labor market concentrated in low-productivity services mean many families feel poorer than before inflation peaked in 2022.
Wage Growth and Purchasing Power
Real wages in Spain remain below their pre-pandemic level, in contrast to many neighboring EU and OECD countries where purchasing power has fully recovered. According to official statistics, the median net monthly salary in 2024 was 2,001 euros. In cities like Madrid and Barcelona, average monthly rents for a whole apartment range from 1,200 to 2,500 euros. Wage growth has been weakest in tourism, retail, and hospitality, highlighting how headline growth masks sharp disparities across households.
The Impact of Inflation
Inflation has slowed, but purchasing power is still depleted. Food prices are around 30% higher than in 2020, far outpacing wage growth over the same period. Prices of staples like eggs, coffee, beef, and chocolate have risen significantly, while olive oil prices have fallen. Economists say inflation pressures have shifted from energy to more domestic factors, with prices in hospitality and tourism rising faster than the euro zone average.
A Gap Between Economic Growth and Household Finances
The gap between Spain’s macroeconomic strength and household finances is a concern. Prime Minister Pedro Sanchez has acknowledged the gap, saying the economy is moving in the right direction, but purchasing power remains weak. The Economy Ministry has said that repeated shocks since the financial crisis in 2008 have fueled a sense of economic insecurity that headline growth and jobs data fail to capture.
Conclusion
In conclusion, while Spain’s economy is performing well, many households are struggling to cope with higher living costs. The gap between economic growth and household finances is a concern, and without stronger productivity growth or faster wage gains, it may take time to disappear. The government has acknowledged the issue and is taking measures to expand affordable housing, but more needs to be done to address the disconnect between Spain’s macro strength and household finances.
