Spanish Economy Faces Slowdown Amid Power Outage and Tariffs
Preliminary data from the National Statistics Institute indicates a decline in GDP growth, exacerbated by recent events.
The Spanish economy is experiencing a slowdown, as evidenced by early data from the National Statistics Institute (INE) indicating that GDP growth had decreased in the first quarter of 2025. The economy grew by 0.6% compared to the previous quarter, marking the smallest increase since mid-2023 and confirming a downward trend in Spain's economic growth.
Year-on-year, the growth rate is adjusting more considerably, dropping from 3.3% at the end of 2024 to 2.8% in March 2025.
This downturn is further reflected in key economic indicators, particularly the household final consumption expenditure, which has reduced its growth from 0.9% quarterly to 0.4%.
National demand has also slowed, with growth plummeting from 1.1% to 0.4%.
The services sector, a crucial component of the Spanish economy, experienced a decline in growth from 0.9% to 0.3% over the same period.
The recent economic moderation was anticipated; however, the extent of the slowdown appears to be more severe than expected, largely due to a massive power outage that affected the entire Iberian Peninsula.
Initial estimates from the CEOE suggest that this energy disruption could negatively impact GDP by approximately one-tenth of a percentage point for the year 2025. The consequences of the blackout are expected to be reflected in the INE's second-quarter data, which will not be available until late summer, with businesses and freelancers primarily feeling the brunt of the impact.
According to industry representatives, sectors have been adversely affected as decreased operational activity hampers their revenues while operational costs remain stable or increase.
The president of the CEOE noted that refineries, for instance, would take a week to restart operations post-outage.
Additionally, the metallurgy industry reported that any production halts would necessitate 'millions in investment' as furnaces may become inoperable.
The impact of the power outage is compounded by the ongoing trade war initiated by former U.S. President Donald Trump.
The Bank of Spain has announced plans to revise its economic projections downward, while the Independent Authority for Fiscal Responsibility (AIReF) estimates that uncertainties stemming from Trump's tariffs could subtract up to 0.5 percentage points from this year’s GDP.
Recent sales data demonstrates the repercussions: Spanish companies’ exports have declined in March compared to the same month the previous year, coinciding with the announcement of initial tariffs by Trump.
The CEOE report highlights that the main international risk continues to be geopolitical tensions, which may lead to increased commodity prices, alongside the new tariff policies from the United States and their ramifications on global trade, supply chains, and investment flows.
Year-on-year, the growth rate is adjusting more considerably, dropping from 3.3% at the end of 2024 to 2.8% in March 2025.
This downturn is further reflected in key economic indicators, particularly the household final consumption expenditure, which has reduced its growth from 0.9% quarterly to 0.4%.
National demand has also slowed, with growth plummeting from 1.1% to 0.4%.
The services sector, a crucial component of the Spanish economy, experienced a decline in growth from 0.9% to 0.3% over the same period.
The recent economic moderation was anticipated; however, the extent of the slowdown appears to be more severe than expected, largely due to a massive power outage that affected the entire Iberian Peninsula.
Initial estimates from the CEOE suggest that this energy disruption could negatively impact GDP by approximately one-tenth of a percentage point for the year 2025. The consequences of the blackout are expected to be reflected in the INE's second-quarter data, which will not be available until late summer, with businesses and freelancers primarily feeling the brunt of the impact.
According to industry representatives, sectors have been adversely affected as decreased operational activity hampers their revenues while operational costs remain stable or increase.
The president of the CEOE noted that refineries, for instance, would take a week to restart operations post-outage.
Additionally, the metallurgy industry reported that any production halts would necessitate 'millions in investment' as furnaces may become inoperable.
The impact of the power outage is compounded by the ongoing trade war initiated by former U.S. President Donald Trump.
The Bank of Spain has announced plans to revise its economic projections downward, while the Independent Authority for Fiscal Responsibility (AIReF) estimates that uncertainties stemming from Trump's tariffs could subtract up to 0.5 percentage points from this year’s GDP.
Recent sales data demonstrates the repercussions: Spanish companies’ exports have declined in March compared to the same month the previous year, coinciding with the announcement of initial tariffs by Trump.
The CEOE report highlights that the main international risk continues to be geopolitical tensions, which may lead to increased commodity prices, alongside the new tariff policies from the United States and their ramifications on global trade, supply chains, and investment flows.
Translation:
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