Bank of Spain: raises 2026 inflation forecast to 3.6% from 3% due to the war in the Middle East

It leaves its GDP growth forecasts for 2026 and 2027 unchanged

The Bank of Spain has revised its inflation forecast for 2026 upwards, raising it to 3.6 per cent from the 3 per cent previously forecast, due to the “impact of the energy shock linked to the conflict in the Middle East”. However, as the Madrid-based central bank explains in its quarterly report, this effect has been “mitigated, in particular, by the fiscal support measures approved in March” by the government. At the end of March, Pedro Sánchez’s government had in fact approved a package of 80 measures totalling 5 billion euros to limit the impact of the war on taxpayers’ pockets. According to the Bank of Spain, however, the country is still experiencing “partial repercussions” of the rise in energy prices, even though “the recent peace agreement (between the United States and Iran, ed.) is helping to bring about some improvement in the outlook for the energy markets”. Despite the “fragile” and “uncertain” international context, the Spanish central bank has not revised its growth forecasts for 2026 and 2027, stating that it expects GDP in Spain to rise by 2.3 per cent and 1.7 per cent respectively – a rate significantly higher than that forecast for the euro area. In the second quarter, GDP is expected to grow by “0.5–0.6%”, according to the Bank of Spain, which forecasts that the unemployment rate will stand at 10% by the end of the year. The public deficit, however, will remain stable at 2.4% of GDP, as in 2025, before falling slightly to 2.3% in 2027, according to the Bank’s projections.

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