Ángel Gavilán, the departing director of the Bank of Spain, has issued a cautionary message regarding the state of the Spanish economy in his final presentation on the institution’s economic outlook.

Gavilán noted a significant downturn in private consumption, which he described as the engine of the economy, alongside stagnation in investment recovery.

During his last appearance, Gavilán addressed the latest economic forecasts following his controversial resignation due to reported conflicts with Governor José Luis Escrivá.

Despite the uncertainty surrounding his departure, Gavilán refrained from discussing the circumstances or the issues raised by Escrivá regarding the end of a cycle in the economy.

While the government has maintained optimistic assertions about economic performance, with quarterly growth rates holding between 0.5% and 0.6%, Gavilán indicated that a deceleration is anticipated for the second quarter due to declining consumer confidence and tariff uncertainties already impacting the economy.

He referenced earlier comments made by the Governor, which included a downward revision of growth projections by three-tenths to 2.4%.

This figure, while still robust compared to other EU nations, reflects mounting concerns about future economic performance.

Gavilán warned that if current conditions do not improve and tariff pressures escalate, GDP growth could lose more than one percentage point in 2026 and 2027, highlighting a troubling trend even amid continued positive growth.

The revised forecasts from the Bank of Spain suggest inflation will stabilize around 2.4%, aided by decreased pressures on food and energy costs, which remain approximately 30% cheaper than the European average.

In contrast, collective bargaining agreements are expected to result in average wage increases of 3.4%, with rises more pronounced in the services sector compared to industry.

This increase may enhance workers' purchasing power, yet Gavilán flagged a notable reduction in consumer spending decisions, particularly on goods from the United States, alongside a slowdown in corporate investment initiatives.

Consumer preference appears to favor spending on travel and tourism over purchases of vehicles and household goods.

To mitigate short-term tariff impacts, European industries accelerated their sales to the US, which surged by 35% in the first quarter.

However, as the 90-day deadline set by the US administration approaches, the outlook for European businesses has deteriorated.

Gavilán emphasized that uncertainty now extends beyond trade issues to other economic indicators, complicating forecasts regarding market and corporate behaviors.

Despite potential improvements in investment expected in 2025, particularly in new housing construction, risks remain due to the winding down of EU fund effects.

The current increase in government defense spending is anticipated to have limited immediate financial impacts, projected to yield only a seven-tenths effect on EU economies in 2023 and 2024, with the benefits concentrated mainly in Germany.

Meanwhile, Spanish exports face a medium-term outlook constrained by adverse effects on key European markets.

Although the drop in oil prices is viewed positively for inflation control, it offers little relief for the broader economic landscape.

In the services export sector, including tourism, growth rates have seen a marked decline compared to the same period last year.

One concerning forecast from the Bank highlights a sharp inflation spike in 2017, linked to increased costs from emissions rights as dictated by upcoming EU regulations.