"Recent data for the first quarter of the year, as well as national and international forecasts, have pushed us to revise our growth forecast," he told reporters, adding the new forecast was "prudent" and "below the majority
The Bank of Spain earlier this month raised its 2017 growth forecast for the Spanish economy, the eurozone's fourth largest, to 2.8 percent from the 2.5 percent previously.
The International Monetary Fund on Wednesday lifted its forecast for the Spanish economy to 2.6 percent growth this year, slightly ahead of the United States and Britain, from 2.3 percent previously.
After a severe crisis sparked when a property bubble burst in 2008, Spain is on the road to recovery, and registered growth of 3.2 percent last year, double the eurozone average.
The Spanish economy has benefited from a record number of foreign visitors and strong exports, which are being boosted by the weak euro, and low interest rates and oil prices.
But the unemployment rate, while falling, remains high at 18.6 percent, the second highest level in the eurozone after Greece's.
Rajoy said growth will remain "very positive" in 2018 and 2019 and create 500,000 jobs per year.
His government's budget for 2017 predicts the unemployment rate will drop to 16.6 percent this year, down from a peak of 27 percent in 2013 at the height of the economic crisis.