Vacationers take photographs as they go to the Sagrada Familia basilica in Barcelona, on August 2, 2025. (Photograph by Manaure QUINTERO / AFP) (Photograph by MANAURE QUINTERO/AFP by way of Getty Pictures)
Manaure Quintero | Afp | Getty Pictures
Spain’s booming economic system is outpacing its European neighbors as tourism, overseas funding and immigration helps gasoline development.
The southern European nation continues to be main development within the euro zone with annual gross home product forecasted to rise 2.5% this yr, whereas the economies of France, Germany and Italy are respectively forecast to increase 0.6%, 0% and 0.7%.
Spain’s GDP surpassed expectations within the second quarter, rising 0.7%, above a Reuters forecast of 0.6%. The expansion was additionally increased than the earlier three months, which levelled at 0.6%, information from the Spanish Nationwide Statistics Institute (INE) confirmed.
“For the second yr in a row, we would be the superior economic system primary when it comes to GDP development,” Spain’s Finance Minister Carlos Cuerpo informed CNBC in April.
“Spain is a good outlier now when it comes to development. It is also a fantastic place to speculate,” he added.
The success of Spain’s economic system depends on excessive consumption and funding, in addition to tourism, Subsequent Technology European funds, and immigration.
“It is not simply tourism, it is also non-tourism companies. We’re exporting extra when it comes to companies to companies like IT, accountability companies, monetary companies, than we’re exporting when it comes to tourism — 100 billion euros [$116.8 billion] with respect to 94.95 billion [euros in tourism]. In order that’s a component of modernization of the Spanish economic system,” stated Cuerpo.
Regardless of this financial development, a number of challenges await Spain, resembling protecting pay in step with the rising price of dwelling, local weather change, an ever extra divided political scene and the actual fact the nation has the highest youth employment fee within the EU.
“What will occur with tariffs and worldwide commerce, particularly in an economic system like Spain, the place exports of products have elevated significantly over the past 15 years?” stated Cardoso.
“The second problem is that the financial savings charges stays comparatively excessive. A 3rd supply is that this low funding charges. And eventually, tips on how to lower the federal government deficit and public debt.”
Immigration and tourism increase
Nonetheless, tourism in Spain represents round 12% of the nation’s GDP, because it advantages from the pandemic rebound, and cheaper costs in comparison with different Western European nations.
The sector’s success has sparked backlash from native communities over the inflow of individuals visiting historic and well-liked websites, significantly in the course of the peak summer time months. Final yr in June, protesters in Barcelona have been seen spraying travellers with water weapons and shouting “vacationers go house.”
The sector may also depend on its rising workforce of almost 3 million individuals as of 2024, a development of 9.7% in comparison with 2023.
Job creation can also be supported by excessive immigration. Whereas different European nations are closing their borders, Spain is planning to welcome almost 1,000,000 migrants over the subsequent three years, by means of work visa schemes and the granting of residence permits to undocumented staff.
“90% of the rise within the labour drive since 2021 comes from immigration,” BBVA Analysis’s Chief Economist Miguel Cardoso informed CNBC.
“That is permitting the service sector to increase. That is protecting companies comparatively aggressive when it comes to containing the rise in labour prices, and it is permitting, for instance, the costs in companies to stay comparatively contained in a excessive inflationary atmosphere.”
Las yr, most individuals migrating to Spain got here from Colombia, Venezuela and Morocco.
“Latin American economies, a few of them will not be doing comparatively effectively, so there’s this push issue. There may be additionally the truth that immigration to the US has turn out to be tougher, and due to this fact persons are turning round and seeing options,” added Cardoso.
Spain’s economic system has additionally been bolstered by the European Union’s Subsequent Technology EU funds which has made 163 billion euros out there to Spain, by means of grants and loans. The nation is the second greatest beneficiary of this pandemic restoration help, following Italy.
Spain’s Cuerpo informed CNBC that 70% of the grants — 55 billion euros — have already been dispersed.
“This was a program that was designed partly to attempt to assist with the restoration after the pandemic,” stated Cardoso.
“So the federal government prioritized funding tasks that they already had a plan for, and due to this fact they’re having a comparatively low multiplying impact throughout the economic system.”
Nonetheless, the Spanish authorities goals to make use of these funds in sectors resembling non-tourism companies exports, together with renewables.
Low power prices
Since investing in inexperienced power within the 2000s, Spain has benefited from low power prices and has seen much less influence from the European power disaster that adopted Russia’s invasion of Ukraine in 2022.
“The rise within the renewable share within the electrical energy combine over the previous 5, six years has implied a drop of 40% in wholesale electrical energy costs,” Cuerpo stated.
Low manufacturing prices are a pretty criterion for corporations, significantly overseas buyers, who additionally provide the sector.
Photovoltaics tracker firm Arctech, based in China in 2009, opened its European headquarters in Madrid in 2024. Photovoltaic cells convert daylight instantly into electrical energy. It is a burgeoning renewable power supply that may result in decrease electrical energy prices.
“Spain might be the situation in Europe the place essentially the most PV has been achieved,” Arctech’s EU and NA Markets Normal Supervisor Pedro Magalhaes informed CNBC.
“The photo voltaic ecosystem is actually right here [in Spain], from the junior engineer, all the way in which to the funds which are investing in these massive belongings.”
The corporate now boasts 17 branches exterior China, and is planning to increase in Jap Europe, in addition to plans to diversify into storage options.
“Issues are occurring right here. We use the port of Valencia to import and distribute to many places in Europe,” Magalhaes added.
Like Arctech, many overseas corporations are planning to make the most of the nation’s low power prices.
Auto large Stellantis teamed up with battery producer CATL in late 2024, asserting plans to construct a $4.3 billion lithium iron phosphate battery plant in Zaragoza, northeastern Spain.
Overseas direct funding in Spain is powerful too, with the nation rating because the fourth most tasty nation within the EU for buyers. China alone declared will probably be investing as much as 11 billion euros in Spain in 2025, because it gears up for a report 33 new tasks within the nation.
“Whenever you have a look at the place does that funding come from, the most important investor in Spain is U.S.,” stated Cuerpo.
“However we’re additionally attracting funding from different components of the world, together with China, on particular sectors associated to renewables, to sustainable mobility as effectively, and that is in fact, at all times a part of our financial safety agenda.”
