In brief

Political stability in Spain will remain fragile, despite the re-election of Pedro Sánchez, the leader of the centre-left Spanish Socialist Workers' Party (PSOE), as prime minister in mid-November 2023. The government will be inherently unstable, given the high number of regional parties that it will depend on, all of which have their own competing interests. The risk of policy paralysis and of the government collapsing ahead of the end of its term in 2027 is very high. Economic activity in Spain is set to slow but remain above the euro zone average, supported by declining inflationary pressures, accelerating real wage growth and a buoyant tourism sector.

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