Spain's central bank projects Iran war to push inflation toward triple digits and stall growth
The Bank of España has revised its economic outlook, forecasting GDP expansion will slow from 2.3% in the base case due to a potential recessionary scenario (1.9%) if conflict escalation continues into late spring or summer months with prolonged fighting near Tehran's oil infrastructure and Iranian ports; meanwhile inflation is expected to surge toward an annual rate of roughly three percent under current conditions but could reach as high as five point nine percent in the worst-case projection, driven by global energy price spikes that threaten Spain’s industrial output.
Key Points
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1The Bank of Spain projects the Spanish economy to grow by 10 percentage points less than expected due to Iran's ongoing war.
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2Inflation is forecasted at a record high, with estimates ranging from an annual rate increase between mid-2% and nearly double digits depending on conflict duration.
Developments
The Bank of Spain projects that if the Iran conflict persists with prolonged energy market disruptions and Brent prices exceeding $100 per barrel, annual inflation could reach 5.9% in late 2026 while economic growth falls to a worst-case scenario rate below its baseline expectations for this year's central forecast (3%).