When growth is not enough: housing and inflation, Sánchez's key election challenges
Spain's economy is still outpacing the eurozone and employment is at its highest since 2008, but Sánchez's term end is marred by inflation, weak productivity and a housing crisis now dominating the election debate.
Pedro Sánchez, Spain's President, will face snap elections on November 29, hoping that the country's strong economic growth will help him overcome the widespread feeling that GDP growth is not enough to improve people's lives. While Spain's GDP grew by 2.8% in 2025 and is expected to continue expanding, the quality of life for Spaniards has not improved, as evidenced by the housing crisis protests.
Spain's growth has been driven by a rise in the population, due to migration flows, and weak labor productivity. Although hourly productivity has improved since 2019, productivity per employee and per full-time worker has remained flat, meaning aggregate growth is not translating to per capita income. Immigration has become an engine of the Spanish labor market, accounting for 7.9% of all job creation in 2025.
Growth in the services sector, particularly exports and tourism, has been the main pillar of Spain's economic expansion. In the first seven months of 2026, Spain received 58.1 million international tourists, a 4.6% increase from the previous year, and tourist spending reached a record 82.054 billion euros. However, a significant share of activity remains concentrated in sectors with low productivity, limiting wage growth.
Inflation remains a concern, with Spain's annual inflation at 5% in September, higher than the euro area average of 3.8%. The increase is mainly attributed to rising fuel prices and the behavior of package holidays. Housing is the biggest problem, with a severe mismatch between supply and demand, especially in large cities and tourist areas. Social housing accounts for only 1.5% to 1.7% of the total stock, compared to an EU average of 6% to 7%.
The economic balance sheet of Sánchez's term in office shows both growth and challenges. While Spain has experienced growth, job creation, and benefited from foreign workers and tourism, low productivity, low purchasing power, and housing difficulties hinder the direct translation of GDP growth to improved living conditions.
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