The Economist, a well-known British economic magazine, said that a decade ago, Spain became synonymous with economic failure due to the severe economic crisis that broke out from 2008 to 2014, known as the “Spanish Great Recession”. The trigger for this period was the sudden bursting of the real estate bubble that had driven Spain’s economic growth in previous years, which led to economic contraction and ultimately a prolonged recession.
According to the development organization Caritas Europa, as a result, the country’s banking system collapsed, unemployment rose due to lack of job opportunities, youth migration increased, and in 2014 Spain was ranked as the second most affected country by poverty among children in Europe, as tens of thousands of Spanish families struggled to meet the daily needs of their children, and the consequences of this major financial crisis have plagued the Spanish economy for years, leaving a heavy mark on it.
What we see today in Spain is the most balanced growth pattern in modern history.
Spanish Economy Minister Carlos Cuerpo was interviewed by Politico at the end of 2024.
But a decade after that crisis, the situation has completely changed, and the country has become synonymous again, but in a completely different way. In December 2024, The Economist ranked Madrid as the best-performing country among 37 rich countries, based on five key economic indicators: GDP, stock market performance, core inflation, unemployment, and government deficit levels. According to The Economist, Madrid has become “the envy of the rich world.”
But this undoubtedly profound and significant shift does not concern Spain alone. While southern European economies such as Spain, Greece, and Italy, which have been synonymous with economic failure compared to other developed countries in recent years, have made impressive progress at a time when traditionally leading economies like Germany are struggling.
In fact, Spain’s excellent performance this year has prompted some analysts to say it provides a lesson for the rest of Europe’s economies, who believe that the continent is currently doomed to recession, with Spain representing the “European growth engine” and Germany representing the “sick man of Europe”.
Spain prospered
According to the European Commission’s Luxembourg Directorate General (Eurostat), which collects and analyzes European statistics, Spain’s economy grew by 3.4% from July to September 2024, compared to an average growth rate of only 0.9% in the Eurozone during the same period.
Spain’s overall growth rate for the whole of 2024 is expected to reach 2.9%, up from 2.5% in 2023. This rate is more than four times the growth rate during Spain’s economic recovery after the Great Recession from 2014 to 2019, which is expected to be around 0.7%, and exceeds most of the growth forecasts released before the beginning of the year, including that of Spanish financial services company CaixaBank, which forecasts growth of only about 1.4%.
According to the American financial magazine Fortune, Spain’s economy will grow three times faster than the entire eurozone, even more than the growth rate of the United States itself.
But the indicators of Spain’s economic recovery are not limited to growth. Madrid has made relative progress in terms of the unemployment rate – one of Spain’s most serious problems – by reducing it to 11% from 13.8% before Covid in 2019, when it was considered the highest among eurozone countries and twice the EU average, according to the British newspaper The Daily Telegraph.
Spain’s unemployment rate remains the highest in the euro area, surpassing Greece, Sweden and Finland, which is 77% higher than the eurozone country average. But the good news is that the unemployment rate has been steadily declining since 2020, and the current unemployment rate is the lowest in the country since the 2008 economic crisis.
Madrid’s success in this regard is an extension of the good economic performance of the southern Mediterranean countries, a region that normally has high unemployment, but after the unemployment rate in Greece, Italy and Spain fell to its lowest level in almost a decade, the situation in the region has seen a significant improvement as described in this article by The Economist, the leader of this indicator remains Italy, which fell by 1.4% last year to just 5.7%.
On the other hand, Spain’s public debt as a percentage of GDP fell from 120.3% in 2020 to 107.7% in 2024, a decline much faster than the average for major European economies. Spain’s deficit is expected to reach half that of France, and the Spanish bond rate (the interest paid by the government on borrowing from investors) has fallen to its lowest level in three years due to reduced debt.
Spain has reached this point, which was unthinkable a few years ago, thanks to a number of factors, the most important of which is the steady growth of tourism revenues, which account for about one-eighth of the country’s GDP, and data on overseas consumption of debit and credit cards showing a year-on-year increase of 12.7% in 2024.
It is worth noting that in August 2024, Spain received 7.3% more tourists than in 2023, and in September, this figure increased by 9.1% compared to the same period last year, according to the National Institute of Statistics in Madrid.
While everyone in the world is worried about the impact of climate change on the planet, Spain benefits; As high temperatures extend the country’s peak summer tourism season, over 8.9 million tourists (up 9.5% from last year) contributed nearly €12 billion to the Spanish economy in October 2024 (up 15.5% from the same period last year), highlighting Spain’s thriving tourism industry and its role in stimulating the economy.
Another very important factor is immigration. While many European countries view immigration as a burden, many economic analysts believe that immigration is the main driver of Spain’s economic growth, with the country’s population growing by 1.1 million between 2022 and 2024, with an influx of 700,000 migrant workers in the last three years.
Angel Talavera, head of European studies at Oxford Economics, said Spain’s ability to attract more skilled immigrants than Italy and integrate them into its economy has allowed Madrid to surpass Rome in overall growth in 2024, as Spain’s skilled migrants are better integrated into the formal economy, and Spain, which has been an immigrant-rejecting country in previous years, has also suffered a major blow to its growth rate.
Adrian Prejean, an economist at Capital Economics, a British economic research firm, believes that high immigration rates from Morocco, Venezuela and Colombia are the main reasons for the significant growth of Spain’s economy, which has led to an expansion of the labor base, which will inevitably lead to increased consumption, which will promote economic growth and GDP growth, as well as increase in national tax revenues.
According to Funcas, immigration mainly helps Spain fill labor shortages in important industries such as agriculture and construction, with immigrants filling 40% of new jobs. Although we have already mentioned that the quality and skills of Spanish workers compared to Italy, many expatriate workers fill important gaps in positions that Spanish citizens are usually reluctant to work in, here we refer to labor-intensive jobs with low productivity.
Economist Adrian Prejean argues that the increase in the number of immigrants in Spain has solved the labor shortage crisis and has not become a constraint on production as in other parts of the EU, and that the influx of migrant workers has also allowed companies to effectively manage wage growth while stimulating consumer spending.
Overall situation
But at the official level, Spain refuses to link economic recovery only to tourism and immigration, arguing that tourism is only an element of revival and does not tell the whole story. According to Spanish Economy Minister Carlos Curpo, to understand the nature of Spain’s economic growth, it is necessary to focus on non-tourism services. Carlos said that exports of non-tourism services such as consulting, finance and information technology generate revenue that surpasses tourism and achieves 100 billion euros, while so-called tourism exports only achieve 90 billion euros, which means that the economy as a whole will achieve balanced growth.
In fact, although Spain’s investment in R&D is lower than the EU average, the country’s tech sector is booming, with Spain spending only 1.44% of its GDP on R&D, compared to the European average of 2.27%.
But tech talent is pouring from all over Europe to Spain at an unprecedented rate, and Spanish universities are becoming hotbeds of cutting-edge research in artificial intelligence, robotics, cybersecurity, and renewable energy. According to Fortune magazine, the Barcelona Supercomputing Center at the Polytechnic University of Catalonia is a world leader in computing.
With over 2,000 startups currently in the region, Barcelona has become the second most popular destination for startup founders in the EU for the sixth year in a row, after Berlin, according to the Catalan government. In 2024, the city rose to fifth place in the EU Startup Ecosystem Index published by Startup Blink, a leading international startup ecosystem analysis consultancy.
Barcelona is not the only case of Spain’s success in this regard, other cities such as Madrid, Valencia, Bilbao, Malaga and Seville are also experiencing significant economic inflows and are becoming increasingly attractive in several areas, which is what distinguishes Spain from other more concentrated European countries, where economic activity is concentrated only in the capital, with at most one or two other cities.
As a result, according to the forecasts of the American magazine Fortune, the total value of Spanish startups in 2023 will exceed 100 billion euros, an increase of 14% compared to 2022.
At the same time, many economic analysts began to point out that in the near future it is possible for Spain to create high-growth companies that will allow them to compete globally, and companies such as Job & Talent, Idealista, Travel Perk, Glovo and others have become models of development and success in Spain.
This scene is a testament to the country’s growing position in attracting technological innovation capabilities year after year, and Spain’s Startup Law enacted in 2022 has played a significant role in this attraction, establishing an effective legal and financial framework for the creation and expansion of startups, as well as creating an easier and less bureaucratic environment for local entrepreneurs and foreign investors.
On the other hand, Spain’s lower cost of living, estimated at half that of other European capitals such as Paris and London, has helped attract international students to study at Spanish universities, allowing a revival of an important aspect of the service sector economy, as the number of international students in the country increased by 60% from 2015 to 2022.
The details make or break it
At the time of writing this article, we reached out to some young people in Spain who do not pay much attention to political or economic news. Surprisingly, they do not feel that their country has really achieved such a prominent economic position. An article published on the ESADE website of the Barcelona Business School also agrees with this opinion, saying that Spaniards are surprised that the world talks about their country’s economy, while they themselves feel that their standard of living does not correspond to the prosperity that the world is talking about, as if there is a disconnect between the economic situation in which citizens find themselves and the indicators and data presented by international press releases.
Of course, this is understandable not only in Spain, but all over the world; It is difficult for ordinary people to feel economic improvements easily, firstly because they are often insignificant and insignificant when translated into quality of life, and secondly, even if they do, it is difficult for citizens to associate them with improved economic performance in the country. Some may interpret getting a well-paying job as a natural direct result of personal efforts, in which improvements in general economic conditions do not play a significant role.
But there are also important details worth mentioning, such as tourism, which has played an important role in Spain’s economic development, but Spanish citizens are increasingly dissatisfied with tourism, taking to the streets to protest against tourism’s increased rents and commodity prices, putting pressure on local resources and infrastructure, and the jobs created by tourism are often unsustainable. Regarding immigration and the role it plays in Spain’s development, some argue that immigration does drive economic growth, but many of them work in low-skilled, low-paying jobs, suggesting an unsustainable growth model.
What’s more, in recent years, Spain’s GDP has grown by 4.7%, while the population has grown by almost 3%, which makes the GDP per capita growth rate only 1.7%.
According to the Labor Force Survey, Spain’s per capita GDP is still 1.2% lower than before the pandemic, while according to the Foundation for Economic Research of the Spanish Bank for Foreign Studies, Spain’s per capita GDP is 2.3% lower than before the pandemic after deducting price increases. On top of that, Spain’s GDP per capita is still below the overall average of EU countries, which is why Fortune magazine says Spain is getting richer, but its citizens are getting poorer.
Here’s the paradox: while many economists are enthusiastic about the Spanish model, others see it as based on quantitative rather than qualitative growth and fail to translate its success into tangible forms, such as increasing personal income or reducing working hours.
While optimists – including many experienced economists – see Spain’s growth as a sustainable model based on structural reforms that will ultimately have a positive impact on the lives of citizens, others are concerned about a growth model based on public spending because Spain’s debt-to-GDP ratio is very high and this growth model does not directly benefit Spanish households who still face inflation and a high cost of living.