The Bank of Spain published a speech by Governor José Luis Escrivá on the outlook for Spain and the euro area amid a sharp rise in global policy and geopolitical uncertainty. The speech highlights that risks to growth are clearly tilted to the downside, while the inflation outlook is more uncertain, and points to Spain’s recent strong performance but an expected narrowing of the growth gap with the euro area over the projection horizon. Model-based estimates presented in the speech suggest that a unilateral 10% tariff on all imports to the United States would lower US GDP by about 0.50 percentage points on a three-year average, with smaller effects for the euro area (around -0.16 pp) and Spain (around -0.03 pp), while pushing inflation up most in the US (around +0.41 pp). Under a retaliation scenario, the estimated GDP impacts deepen to around -0.99 pp for the US, -0.24 pp for the euro area and -0.11 pp for Spain, with inflation effects of roughly +0.63 pp, +0.09 pp and +0.07 pp respectively. The speech also notes that EU defence-related fiscal plans have been associated with higher long-term sovereign yields, citing figures including EUR 650 billion in member states’ defence spending plans alongside an escape clause linked to increases of up to 1.5% of GDP, the “Rearm EU” EUR 150 billion joint borrowing facility, and Germany’s EUR 500 billion special infrastructure fund. For Spain, the update points to buoyant job creation and a narrowing unemployment gap versus the euro area (4.3 percentage points in 2024 Q4), nearly 2 million net immigrants in 2022–2024, and lower electricity prices linked to renewable investment, with industrial electricity prices around 30% below the euro area and futures around 25% lower. Inflation is described as broadly tracking the euro area recently, with higher food inflation partly reflecting consumption-basket composition effects, and the Bank’s projections showing Spain’s headline inflation easing from 2.9% in 2024 to 2.5% in 2025 and 1.7% in 2026.
Bank of Spain 2025-03-24
Bank of Spain Governor says a 10% US tariff shock would weigh on growth and sees Spanish inflation moving towards 2%
The Bank of Spain released a speech by Governor José Luis Escrivá on Spain's economic outlook amid global uncertainty, highlighting downside growth risks and an uncertain inflation outlook. A 10% US import tariff could reduce US GDP by 0.50 percentage points, with smaller impacts on the euro area and Spain, while retaliation would deepen these effects. The speech notes Spain's strong job creation, narrowing unemployment gap, and lower electricity prices due to renewable investments, with inflation projected to ease from 2.9% in 2024 to 1.7% in 2026.