Spain beat all of Europe with stunning economic growth rates

The latest figures on Spain's economic situation have experts blown away: It was the fastest-growing economy in the eurozone in 2024 with growth rates a staggering four times higher than the eurozone average. Spanish Economy Minister Carlos Cuerpo further underscored this achievment by emphasizing that Spain accounted for 40% of the eurozone’s overall growth that year. Economists all over the continent have now been rushing to analyse the Iberian country's monetary and fiscal policies that led to such a strong performance. 

The country's GDP increased by 0.8% in the last quarter, primarily due to strong domestic consumption. According to an article by Euractiv, these results even exceeded government expectations. The Spanish government had initially projected a growth rate of 2.7% for 2024, but the final figures, expected in March, are likely to confirm stronger-than-expected performance. Looking ahead, Spain is well-positioned for continued economic expansion in 2025 and 2026, Cuerpo believes.

Well-managed labor market

Spain’s economic strength is underpinned by robust exports and domestic consumption, which have been supported by a healthy labor market. The country’s unemployment rate fell to 11.21% in the third quarter of 2024, its lowest level since the 2008 financial crisis. Brokerage firm Jefferies told the Euroweekly News publication that Spain’s fiscal position is stronger than that of its European counterparts, making it less vulnerable to potential trade tariffs proposed by newly elected US President Donald Trump.

A key contributor to this improvement has been immigration, which has provided a steady supply of workers. In the last quarter, the foreign-born active population grew by 9.1% year-on-year, compared to just 0.6% growth among native Spaniards. Since 2000, Spain’s population has increased by eight million, largely due to liberal immigration policies. Immigrants now make up 18% of the population, with many working in essential sectors such as services, construction, and agriculture. In response to labor shortages, the government recently announced plans to grant residency and work permits to nearly one million undocumented migrants.

Tourism

Tourism has also been a major driver of this growth, with Spain welcoming 9.6 million international visitors in September, a 9.1% increase from the previous year. Tourist spending also rose significantly, reaching €12.62 million, a 12.7% year-on-year jump. However, this resurgence has also sparked protests among residents concerned about rising rents, precarious jobs, and other adverse effects of mass tourism.

Public spending

Government investment has also played a significant role in Spain’s economic growth. The country is set to receive €163 billion from the European Union’s Next Generation EU (NGEU) fund, aimed at post-pandemic recovery. By late October 2024, Spain had already received €48.3 billion of these funds. The long-term impact of this funding will depend on how effectively it drives investment and productivity growth, according to Professor Ruben Dewitte cited by Euronews.

Bounce-back from pandemic lows

This marks the fourth consecutive year of economic expansion for Spain since the downturn caused by the COVID-19 pandemic. A key factor in Spain’s rapid economic growth is its sharp recovery from the pandemic which saw the Southern European country hit particularly hard, both in economic terms and the number of people dying from the virus. The Spanish economy, heavily reliant on tourism which found itself in a freefall amid multiple lockdowns and a virtual travel-ban, took longer to recover. Experts caution that the results have to be viewed through the pandemic lense, as the rebound may appear more pronounced due to the low base effect the Spanish economy was a couple of years ago. Nevertheless, even considering this factor the figures provided by Spanish institutions are still very admirable.

Outlook and challenges

Looking ahead, economic experts believe Spain’s growth momentum will continue. Inflation has already dropped below 2%, which should help sustain strong consumer spending. Juan Carlos Martínez Lázaro, a professor of economics at IE University, told Euronews that Spain’s robust domestic consumption will likely remain a key driver of economic growth in the coming years.

However, some analysts cautioned that Spain still faces significant challenges. The average monthly salary stands at €1,134, about half of the average salary in Germany. Working poverty is widespread, with nearly 14% of Spaniards and around 30% of non-EU immigrants earning below the poverty line. Alejandro García-Gil, Head of Social Protection and Employment Policies at Oxfam Intermón, argues that while job creation is important, improving job quality is equally critical.

A sharp rise in the cost of living and a persistent housing crisis also threaten the country's stability. Unless these issues are addressed, improvements in economic growth may not translate into a better quality of life for residents, the article warns.

By Nazrin Sadigova