European Daily: Spain—Slowing Momentum, Sustained Outperformance and Lower Debt After the Election

Spanish growth has outperformed the other major European economies since early 2023, and we expect this relative outperformance to continue through 2027, albeit at a gradually slower pace. The expansion has been led by high value-added service sectors — including finance, ICT and professional services — while manufacturing continues to lag. Persistent economic momentum has pushed the employment rate to a record high, while the unemployment rate now stands only 2pp above its 25-year low. The investment rate has recovered to above 20% of GDP, but productivity growth has recovered only gradually and returned to its 2019 level only at the start of this year. Housing remains a critical bottleneck: house price appreciation reached 12.5%yoy, the highest rate in the Euro area, driven primarily by strong demand rather than construction-cost pressures. Spain faces less near-term political uncertainty than peers, and a clearer post-election majority could reinforce fiscal consolidation and suppor