Tourists are gathering at the base of the famous Roman aqueduct in Segovia, a tiny city in central Spain, on a cold midwinter afternoon. Tourists from all across Europe, Asia, and Latin America go to Segovia to enjoy its culinary pleasures and historic charm while admiring its medieval arches and snapping pictures.
Elena Mirón, a local guide, is set to accompany a group over the city while sporting a fuchsia-colored beret. “I thought at one point during COVID that perhaps tourism will never be the same again,” she recalls. However, things are going really well right now, and I think this year will be just as excellent as 2023 and 2024. I’m content because I can support myself with this fulfilling career.
Spain’s record-breaking 94 million visitors in 2024 put it in direct competition with France, which brought in 100 million visitors, and drove the country’s economic growth. This influx of visitors has been vital to Spain’s post-COVID recovery, contributing significantly to Spain’s economic growth. With a 3.2% GDP gain in 2024, Spain’s tourism industry—which is essential to the country’s economy—has helped it easily surpass other European nations like Germany, France, Italy, and the UK.
What is causing Spain's robust economic expansion?
International attention has been drawn to Spain’s ability to recover from the pandemic and sustain robust economic growth. The Economist magazine claims that Spain’s economy is currently the best-performing in the world. The “balanced model,” as Spain’s industry minister Carlos Cuerpo has put it, is responsible for this rise. “The balanced nature of the Spanish model ensures the sustainability of growth, which is why it is so successful,” he says. Spain accounted for 40% of the eurozone’s growth last year, Cuerpo notes.
But there are other factors besides tourism that are driving Spain’s economic expansion. By concentrating on industries like investment, technology, and financial services, the nation has diversified its economy. “By modernizing our economy and overcoming COVID, we are increasing our potential GDP growth,” Cuerpo continues.
Spain’s receipt of post-pandemic recovery money from the EU’s Next Generation initiative is one of the biggest factors driving this modernization. Up to €163 billion will be given to Spain by 2026, and this money would be used for initiatives like low-emission zones, national rail infrastructure, the electric vehicle sector, and small company subsidies.
What is Spain's future investment strategy?
“Public spending has been high, and is responsible for approximately half our growth since the pandemic,” says María Jesús Valdemoros, an IESE Business School expert in economics. Spain’s strategy differs from that of other significant European economies, where growth has been impeded by a greater reliance on industry. High energy prices, Chinese competition, and trade protectionism are some of the factors that have affected economies like Germany’s, Italy’s, and the UK’s.
In order to lessen the effects of the energy crisis brought on by Russia’s invasion of Ukraine in 2022, the Spanish government also profited from subsidies designed to lower gasoline prices and encourage public transportation. By raising the minimum wage and implementing these reforms, inflation dropped from a peak of 11% in mid-2022 to 2.8% by the end of 2024.
In order to lower consumer energy rates, Spain and Portugal were also able to negotiate a “Iberian exception” with Brussels that capped the price of gas used to generate power.
How does Spain's economic future relate to green energy?
Spain’s economic outlook has been further reinforced by its green energy generation. Spain is well-positioned to benefit from the transition to clean energy since it has the second-largest renewable energy infrastructure in the EU. For Spain, the second-largest automaker in Europe, this is especially important as it attempts to increase its output of electric vehicles (EVs).
The CEO of Seat and Cupra, Wayne Griffiths, who was born in Britain, outlines the opportunities in this industry: Spain has everything you need to succeed, including competitive, skilled workers and an energy strategy that supports them. Making zero-emission vehicles using dirty energy is pointless.
What steps is Spain doing to solve its demographic and unemployment issues?
Spain has had high unemployment rates for a long time; it routinely has the highest rate in the EU. But in the second half of 2024, the labor market has improved, as seen by the unemployment rate falling to 10.6%, the lowest level since 2008. In the meantime, Spain now has a record 22 million employed individuals.
Labor market reforms that promote job stability are a major factor in this improvement. By increasing the use of permanent contracts and decreasing the number of temporary ones, these measures have increased job security.
With Spain’s population aging quickly, integrating immigrants into the labor market has also become essential to the country’s economic success. The significance of immigration has been underlined by Prime Minister Pedro Sánchez, who has called their economic contribution to Spain “fundamental.”
What possible difficulties might the Spanish economy face in the future?
Spain’s economy is doing well, but there are still a number of obstacles to overcome. With a growing pushback against mass tourism from locals in some areas, the nation’s excessive reliance on tourism is increasingly perceived as a major risk. Furthermore, Spain’s national debt is a serious issue because it exceeds the nation’s yearly GDP. According to Valdemoros, “This is an imbalance that we need to correct, not just because the EU’s new fiscal norms demand it, but because it could cause financial instability.”
Millions of Spaniards are also having difficulty finding cheap housing as a result of the housing crisis. However, Spain’s extremely divided political environment has made it challenging to address this issue, as the minority administration has little authority to enact meaningful reforms.
In 2025 and beyond, will Spain continue to grow?
With GDP growth predicted to remain higher than the EU average, the European Commission predicts that Spain will continue to lead economic growth among the EU’s major economies in 2025. Spain must, however, address its weaknesses—such as its reliance on tourism, high public debt, and housing affordability—while making sure that its economic diversity keeps growing if it is to sustain this momentum.
With impressive results in industries like tourism, technology, renewable energy, and labor reform, Spain continues to be Europe’s development engine as it negotiates these obstacles. But maintaining this growth will necessitate tackling the new problems that can impede its advancement.
