Spain's first quarter GDP growth confirmed at 0.6% - final data

Spain's economy experienced a slowdown in Q1 2025, with GDP growth decelerating to 0.6% quarter-on-quarter and 2.8% annually, down from previous periods. This deceleration is largely attributed to global geopolitical turmoil and escalating trade tensions, leading the Bank of Spain to trim its 2025 growth forecast to 2.4%. The trend reflects broader economic concerns across the Eurozone, as major economies like France, Italy, and Germany have also revised down their growth outlooks for the year.

Analysis

Spain's economy is exhibiting a clear, albeit moderate, deceleration, with quarter-on-quarter GDP growth slowing to 0.6% in Q1 2025 from 0.7% previously, and annual growth declining to 2.8% from a revised 3.3%. This slowdown prompted the Bank of Spain to lower its full-year 2025 growth forecast to 2.4%, a significant reduction from the 3.2% expansion recorded in 2024. The primary drivers of this cooling trend are external, with the central bank explicitly citing geopolitical turmoil and the impact of the ongoing tariff disputes involving the U.S., China, and Europe. Despite this revision, Spain remains a notable outperformer within the Eurozone, as its 2.4% growth forecast stands in stark contrast to the bloc's overall 0.9% expectation and the sharply lower forecasts for Germany (0.1%), France (0.6%), and Italy (0.6%). The data thus paints a dual picture: a Spanish economy succumbing to global headwinds but demonstrating significant relative resilience compared to its European peers.

Key Decisions for Investors

• Given Spain's projected 2.4% growth significantly outpaces the Eurozone's 0.9% forecast, investors should evaluate opportunities for overweighting Spanish assets relative to German, French, and Italian markets.
• The primary risks to Spain's outlook are external; therefore, investors must closely monitor for any escalation in global trade tariffs or geopolitical instability, as these could trigger further forecast downgrades.
• With growth decelerating from prior quarters, it may be prudent to reassess exposure to Spanish cyclical sectors highly dependent on international trade and consider rotating towards more domestically-focused industries.