Vacationers take pictures as they go to the Sagrada Familia basilica in Barcelona, on August 2, 2025. (Picture by Manaure QUINTERO / AFP) (Picture by MANAURE QUINTERO/AFP by way of Getty Photos)
Manaure Quintero | Afp | Getty Photos
Spain’s booming economic system is outpacing its European neighbors as tourism, overseas funding and immigration helps gasoline progress.
The southern European nation continues to be leading growth 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 develop 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 greater 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 by way of GDP progress,” Spain’s Finance Minister Carlos Cuerpo advised CNBC in April.
“Spain is a superb outlier now by way of progress. It is also an important 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 by way of companies to corporations like IT, accountability companies, monetary companies, than we’re exporting by way of 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,” mentioned Cuerpo.
Regardless of this financial progress, a number of challenges await Spain, equivalent to preserving pay in keeping with the rising value of dwelling, local weather change, an ever extra divided political scene and the very fact the nation has the highest youth employment rate 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?” mentioned Cardoso.
“The second problem is that the financial savings charges stays comparatively excessive. A 3rd supply is that this low funding charges. And at last, lower the federal government deficit and public debt.”
Immigration and tourism growth
Nonetheless, tourism in Spain represents around 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 widespread websites, significantly throughout the peak summer time months. Final yr in June, protesters in Barcelona had been seen spraying travellers with water weapons and shouting “vacationers go house.”
The sector may also rely on its rising workforce of practically 3 million folks as of 2024, a development of 9.7% compared to 2023.
Job creation can also be supported by excessive immigration. Whereas different European international locations are closing their borders, Spain is planning to welcome practically one million migrants over the subsequent three years, via work visa schemes and the granting of residence permits to undocumented employees.
“90% of the rise within the labour power since 2021 comes from immigration,” BBVA Analysis’s Chief Economist Miguel Cardoso advised CNBC.
“That is permitting the service sector to develop. That is preserving corporations comparatively aggressive by way of 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 should not doing comparatively nicely, so there may be this push issue. There’s additionally the truth that immigration to the USA has grow to be tougher, and subsequently individuals are turning round and seeing alternate 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, via grants and loans. The nation is the second greatest beneficiary of this pandemic restoration help, following Italy.
Spain’s Cuerpo advised CNBC that 70% of the grants — 55 billion euros — have already been dispersed.
“This was a program that was designed partially to attempt to assist with the restoration after the pandemic,” mentioned Cardoso.
“So the federal government prioritized funding tasks that they already had a plan for, and subsequently 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 equivalent to 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 affect 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 mentioned.
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 straight into electrical energy. It is a burgeoning renewable power supply that may result in lower electricity costs.
“Spain might be the placement in Europe the place essentially the most PV has been performed,” Arctech’s EU and NA Markets Normal Supervisor Pedro Magalhaes advised CNBC.
“The photo voltaic ecosystem is basically right here [in Spain], from the junior engineer, all the best way to the funds which can be investing in these giant property.”
The corporate now boasts 17 branches outdoors China, and is planning to develop in Japanese 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, announcing plans to construct a $4.3 billion lithium iron phosphate battery plant in Zaragoza, northeastern Spain.
International direct funding in Spain is powerful too, with the nation ranking as the fourth most attractive country 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 document 33 new tasks within the nation.
“While you take a look at the place does that funding come from, the biggest investor in Spain is U.S.,” mentioned 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 nicely, and that is in fact, all the time a part of our financial safety agenda.”
