Sánchez Faces Housing and Inflation Challenges Ahead of Spanish Elections

Spanish Prime Minister Pedro Sánchez faces a tough challenge as he heads into snap elections on 29 November 2026. Despite strong economic growth, with GDP expanding by 2.8% in 2025 and an expected 2.4% in 2026, many Spaniards feel that this growth has not improved their daily lives. The European Commission attributes this disconnect to rising immigration and weak labor productivity, which has stagnated since 2019. While employment grew by 2.6% in 2025, a significant portion of these jobs were filled by foreign workers, accounting for 7.9% of all new positions.

The tourism sector has been a key driver of Spain's economy, with 58.1 million international tourists visiting between January and July 2026, a 4.6% increase from the previous year. Tourist spending reached a record 82.054 billion euros, boosting the country's current account surplus. However, much of this growth is concentrated in low-productivity sectors like agriculture, limiting wage growth and economic benefits for many Spaniards.

Inflation remains a pressing issue, with Spain's annual inflation rate at 5% in September 2026, higher than the eurozone average of 3.8%. Rising fuel prices and package holiday costs have contributed to this surge. The housing crisis further exacerbates the situation, with severe housing deprivation and a severe shortage of social housing, which makes up only 1.5% to 1.7% of the total stock, compared to the EU average of 6% to 7%.

The political fallout from the housing crisis led Sánchez to dissolve parliament and call for early elections. While his government has overseen job creation and economic expansion, the lack of tangible improvements in living standards poses a significant hurdle as he seeks re-election.