The International Monetary Fund released its Article IV report on Spain on Friday. It warns of slower growth and inflation up to 4.8% in 2027 if the Iran war drags on.
The organization maintains its baseline projections of 2.1% GDP growth in 2026 and 1.8% in 2027, with inflation at 3% and 2.3% respectively. In the severe scenario, with oil above 110 dollars per barrel, growth would fall to 1.5% this year and 1.1% next.
Average inflation would then rise to 4.1% in 2026 and 4.8% in 2027. The IMF calls for withdrawing the energy VAT cuts approved due to the war, except in the worst case, and targeting them at vulnerable households.
The report also notes the intensification of political fragmentation and the third consecutive budget extension. The Ministry of Economy, led by Carlos Cuerpo, stresses that Spain faces the shock from a position of strength thanks to renewables.
