Spain outpaces US in economic growth, jobs, stock market performance

According to an article disseminated by The Economist, Spain has undergone a remarkable economic transformation over the past decade, shifting from a symbol of crisis to one of the strongest performers among advanced economies. 

A decade ago, Spain was synonymous with economic failure. The government and banks seemed trapped in a downward spiral, relying on bailouts, while young people either emigrated or protested due to limited opportunities. The country was littered with half-finished homes and abandoned airports, remnants of a collapsed construction boom. 

Fast forward to today, and Spain’s turnaround is striking. By our estimates, the country is on track to be the best-performing advanced economy in 2024 across several key indicators, including GDP growth, inflation, unemployment, fiscal policy, and stock market performance. Spain is outpacing the US in both overall economic growth and job creation, traditionally seen as the benchmark for rich-world economies.

While Greece, Ireland, and Denmark, which also faced crises a decade ago, have seen progress in 2024, Spain stands out. Its economy has benefitted from the fruits of past reforms, providing a powerful counterargument to those who believe Europe is destined for stagnation. Spain’s success offers valuable lessons for other European nations, but it also carries a cautionary message for its own policymakers.

One key lesson is the importance of focusing on services rather than overemphasizing manufacturing. While Spain's industrial production hasn't declined as sharply as Germany's—partly due to lower energy costs—it has still stagnated. In contrast, tourism has rebounded from its pandemic lows, and the country is advancing up the value chain by exporting more consulting services and technological expertise, alongside traditional offerings like sun and sangría. Non-tourism services have grown from about 5.5 per cent of GDP before the pandemic to 7-8% today, according to BBVA, a bank.

Another important lesson is the value of staying open to immigration. Whereas young Spaniards once left in search of opportunities, many now arrive, particularly from Latin America. Since 2019, Spain's foreign-born workforce has increased by approximately 1.2 million. While many of these immigrants fill low-paid, low-skilled jobs, the economy is still 7 per cent larger than in 2019, though only 3 per cent larger after adjusting for population growth. This is still a stronger performance than countries like the UK and Canada, which have also experienced immigration surges but seen a decline in GDP per capita.

Spain has also attracted investment from Chinese companies. On December 10th, Stellantis, an automotive manufacturer, and CATL, a Chinese battery maker, announced plans to build a new battery factory in Zaragoza. (Stellantis’s largest shareholder, Exor, also partly owns The Economist's parent company.) Additionally, Chery International, a Chinese carmaker, has chosen Barcelona as the location for its first European manufacturing plant.

Most notably, Spain demonstrates that structural reforms yield long-term benefits. Much of the country’s recent success stems from post-financial crisis decisions to reform its banking sector and labor market. The financial industry has consolidated, while labor market changes have made it easier to renegotiate contracts and encouraged companies to hire more permanent staff. A series of measures designed to promote renewable energy, such as the abolition of the “sun tax” on solar power, has also spurred growth in green energy.

By Naila Huseynova