Bank of Spain to lower growth forecasts following U.S. tariff impacts

On April 9, 2025, in Madrid, the governor of the Bank of Spain, José Luis Escrivá, discussed the implications of the dollar's weakening status as an international reserve currency and the potential rise of the euro. He emphasized that the current uncertainties could lead to a stronger role for the euro, backed by financial stability and security measures offered by the European Central Bank (ECB). Furthermore, he mentioned the ongoing work on the digital euro project, which aims to replicate the trust and functionality of physical money in digital formats, signifying a step towards modernizing the euro system. In addition to discussing the euro, Escrivá announced a downward revision of Spain's economic growth forecasts attributed to U.S. President Donald Trump's tariff policies. The previous forecast of 2.7% growth, deemed optimistic, will now be adjusted, although the exact new figure is yet to be determined due to various uncertainties in the economic environment. Escrivá clarified that while growth may decline, he prefers not to label this as a recession but rather as a temporary impact on economic activity. The governor expressed concern over the potential negative effects on the global economy stemming from U.S. policies, highlighting the complexity of the current economic landscape. He noted that the interplay of tariffs and the potential disruptions to global supply chains could lead to significant ramifications for Spain’s economy, which has been benefiting from relatively high growth rates recently. Escrivá also pointed out that the overall economic atmosphere is fraught with unpredictability, particularly regarding consumer and investor perceptions. He warned that disruptiveness often leads to retractions in spending, which may surface with some delays. In an environment where habitual trade and economic predictions are challenged, anticipating long-term impacts on inflation and economic activity is crucial for Spain’s financial stability and growth outlook.