Spain: Economic and Political Overview
Spain has been in the midst of a balanced economic recovery in recent years and is currently one of the fastest-growing economies in Europe. After growing by 2.7% in 2023, real GDP expanded by 3.2% in 2024, buoyed by carry-over effects from the previous year. Consumer spending continued to increase, supported by job creation and real income gains. On the external front, strong tourism and non-tourism service exports help net exports (data INE). As per the EU Commission, economic activity is projected to slow to 2.3% in 2025 and 2.1% in 2026, with domestic demand remaining the primary driver, fueled by consumption and increased investment. This is linked to the Recovery and Resilience Plan (RRP), solid corporate finances, and easing financing conditions. Furthermore, a rebound in imports should reduce the external demand contribution to GDP in 2025 and 2026.
After reaching 3.5% of GDP in 2023, the general government deficit decreased to an estimated 3% in 2024, as most measures to mitigate the economic and social impact of high energy prices were phased out (data EU Commission). The revenue-to-GDP ratio increased, partly due to the removal of VAT reductions, the special tax on electricity, and the exemption from the tax on the value of electricity. The phase-out of the fuel rebate also contributed to savings on the expenditure side. Risks to the projections stem from the costs associated with addressing the impact of recent floods in the Valencian Community. With unchanged policies, the government deficit is expected to further decline in 2025 to 2.6% of GDP, despite slightly higher interest expenditure. This decline is driven by slower growth in nationally-financed primary expenditure and positive tax revenue trends. Supported by strong nominal GDP growth, which outpaced the cost of debt servicing, the debt-to-GDP ratio decreased to 102.3% in 2024 (from 105.1% one year earlier). The ratio is expected to decrease more gradually in 2025-2026, reaching around 101.1%, due to a less favourable interest-growth rate differential (EU Commission). Annual HICP inflation declined to 2.8% in 2024, driven by the ongoing slowdown in energy and food price inflation. Underlying price pressures eased more gradually, particularly in services related to hospitality and transport. Headline inflation is expected to continue slowing in 2025, reaching 2.2%, with the downward trend in underlying components projected to persist in the coming quarters, before easing further to 2.0% in 2026.
The strong performance of the labour market continued into 2024, with job creation accelerating sharply in the first half of the year and maintaining momentum into the third quarter. Employment growth expanded by 2.3% in 2024, mainly driven by strong immigration flows. The unemployment rate is expected to decline steadily, reaching 10.7% by 2026, down from around 11.5% in 2024. Nominal wage growth outpaced inflation in 2024, with real income gains expected to moderate in 2025 and 2026. Spain remains a country with strong inequalities: according to the latest data by Eurostat, 27% of the population is at risk of poverty or social exclusion (the third-highest level in the EU), despite a relatively high GDP per capita (USD 35,789 in 2024 – IMF).
| Main Indicators | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
| GDP (billions USD) | 1,620.56 | 1,731.47 | 1,827.58 | 1,913.16 | 1,986.27 |
| GDP (Constant Prices, Annual % Change) | 2.7 | 2.9 | 2.3 | 1.8 | 1.6 |
| GDP per Capita (USD) | 33,896 | 35,789 | 37,362 | 38,707 | 39,792 |
| General Government Balance (in % of GDP) | -3.7 | -3.4 | -3.1 | -3.1 | -3.1 |
| General Government Gross Debt (in % of GDP) | 105.0 | 102.3 | 100.7 | 99.6 | 99.1 |
| Inflation Rate (%) | 3.4 | 2.8 | 1.9 | 2.0 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 12.2 | 11.6 | 11.2 | 11.1 | 11.0 |
| Current Account (billions USD) | 43.02 | 58.18 | 58.74 | 56.66 | 55.57 |
| Current Account (in % of GDP) | 2.7 | 3.4 | 3.2 | 3.0 | 2.8 |
Source: IMF – World Economic Outlook Database, October 2021
Agriculture contributes around 2.5% of the Spanish GDP and employs 4% of the workforce (World Bank, latest data available). The country is home to almost one million agricultural and livestock businesses, covering 30 million hectares of land. Spain is the world's largest producer of olive oil and the world's third-largest producer of wine. The country is also one of the largest producers of oranges and strawberries in the world. The main crops are wheat, sugar beet, barley, tomatoes, olives, citrus fruits, grapes and cork. Livestock is also important, especially for pigs and cattle: Spain accounted for about one-quarter of the EU's pig (25.4%) and sheep (23.6%) populations in 2023 (EU Commission, latest data available). Data by the Agricultural Ministry shows that land destined for biological cultivation accounts for 12.5% of the total arable land, with 64.430 active operators in the sector (in production or distribution). Agricultural income in Spain reached EUR 37.759 billion in 2024, marking a 14.2% increase compared to 2023, according to the Ministry of Agriculture, Fisheries, and Food's initial economic estimates for the sector. This growth is largely attributed to lower production costs and a significant rise in agricultural production value, which hit a record high of EUR 68.430 billion. The increase in agricultural output, encompassing both crop and livestock production, was primarily driven by an 11% rise in production volumes, despite a 6% decline in prices due to falling overall inflation. The agricultural workforce grew by 1.5%, and income per Annual Work Unit (AWU) rose by 12.6%, reaching EUR 45,890.
The industrial sector accounts for one-fifth of GDP and employment. Manufacturing as a whole is the most important sector as it accounts alone for around 11% of GDP (World Bank). The industrial sector is dominated by automotive, textiles, industrial food processing, iron and steel, naval machines, and engineering. Spain is the second-largest automotive manufacturer in Europe, with exports accounting for over 60% of production. New sectors such as outsourcing of electronic components production, information technology, and telecommunications provide high growth potential. The renewable energy sector is also growing at a fast pace. According to the Instituto Nacional de Estadística (INE), industrial production recorded a 0.7% yearly increase in 2024, after a 1.6% one year earlier.
The tertiary sector contributes 68.7% of the GDP and employs 76% of the active population. The tourism sector is pivotal for the country’s economy, being Spain’s main source of income, as the country is the second-most popular tourist destination in the world. According to the latest official figures, tourism contributed 12.3% of GDP and employed 11.6% of the total number of national insurance contributors in 2023, generating a turnover of EUR 184 billion. The banking sector is also important and is composed of ten banking groups under the direct supervision of the Single Supervisory Mechanism (representing more than 90% of the industry). The Bank of Spain directly oversees the remaining 139 entities, including 47 less significant institutions and 92 subsidiaries or branches of foreign organizations (European Banking Federation).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 3.6 | 19.9 | 76.5 |
| Value Added (in % of GDP) | 2.5 | 20.1 | 68.7 |
| Value Added (Annual % Change) | 6.4 | 1.1 | 3.3 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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