On a brisk winter afternoon in Segovia, central Spain, a group of tourists congregates beneath the city’s ancient Roman aqueduct, admiring its iconic arches and snapping photos. Among the crowd are not just locals but also visitors from various European nations, Asia, and Latin America, all captivated by Segovia’s rich history, culinary delights, and picturesque setting nestled amidst the mountains north of Madrid.
Reflecting on the impact of Covid, Elena Mirón, a vibrant local guide sporting a fuchsia beret, expresses relief and optimism as she prepares to lead her group through the city. Despite initial concerns about the future of tourism, she now sees a positive outlook for the industry, foreseeing prosperous years ahead. Spain welcomed a record-breaking 94 million tourists in 2024, rivaling France’s 100 million visitors to become a leading global tourist destination.
The resurgence of the tourism sector post-Covid has played a pivotal role in propelling Spain’s economy, surpassing major European counterparts such as Germany, France, Italy, and the UK. Spain’s GDP expanded by 3.2% in the past year, contrasting with Germany’s 0.2% contraction, and modest growth in France, Italy, and the UK. This economic vitality has earned Spain recognition as the world’s top-performing economy by The Economist magazine.
Carlos Cuerpo, Spain’s business minister in the Socialist-led coalition government, credits the nation’s success to a diverse and balanced economic model. He highlights tourism, along with financial services, technology, and investment, as key drivers that have fueled Spain’s recovery and positioned it for sustainable growth. The country’s contribution to 40% of eurozone growth underscores its robust economic performance.
Further bolstering Spain’s economic transformation is the infusion of funds from the EU’s Next Generation program aimed at post-pandemic recovery. With an allocation of up to €163bn by 2026, Spain is the program’s largest beneficiary alongside Italy. These funds are being directed towards enhancing the national rail network, establishing low-emission zones, fostering the electric vehicle industry, and supporting small businesses.
Maria Jesús Valdemoros, an economics lecturer at Spain’s IESE Business School, emphasizes that public expenditure has played a pivotal role in driving economic growth post-pandemic. While Spain’s diversified economy has thrived, other European nations have faced challenges due to overreliance on industrial sectors grappling with energy costs, global competition, environmental transitions, and trade barriers.
Despite economic strides, Spain has navigated challenges posed by supply chain disruptions and geopolitical events, such as the Russian invasion of Ukraine, which triggered a cost-of-living crisis marked by soaring inflation. Madrid’s interventions, including subsidies, have helped stabilize the situation, with inflation receding from a peak of 11% in July 2022 to 2.8% by the close
Reducing fuel consumption costs and promoting the use of public transport were crucial in lessening the impact of rising energy prices, along with multiple minimum wage hikes. Amidst the European energy crisis peak, Spain and Portugal secured a “Iberian exception” with Brussels, capping gas prices for electricity generation to alleviate consumer bills. These measures, according to Mr. Cuerpo, helped Spain combat its historic economic volatility.
Spain’s robust green energy production, the EU’s second-largest, not only ensures power supply but also stimulates investment. This strength is particularly advantageous for a leading European car producer, Spain, as noted by Seat and Cupra CEO Wayne Griffiths. While electric vehicle production lags in Spain compared to other European nations, Griffiths sees significant potential in this sector, emphasizing the importance of clean energy for zero-emission vehicles.
Despite these positive developments, Spain has grappled with persistently high unemployment rates, the highest in the EU, though it improved to 10.6% in late 2024, marking its lowest level since 2008. The country also witnessed a record high employment rate of 22 million, attributed to a labor reform promoting job stability by limiting temporary contracts in favor of permanent ones. Immigrant integration into the workforce has spurred debate, with many highlighting their essential role in Spain’s aging population context.
Prime Minister Pedro Sánchez has stressed immigrants’ economic significance, while the European Commission predicts Spain will lead growth among major EU economies, maintaining a position above the EU average. Challenges, however, loom on the horizon, including over-reliance on tourism and local resistance to its expansion, high public debt exceeding economic output, and a housing crisis affecting millions.
María Jesús Valdemoros warns of the need to rectify these imbalances, not only to align with EU fiscal norms but also to prevent financial instability. With Spain’s tangled political landscape, Sánchez’s minority government faces hurdles in addressing these issues while striving for progress.
Amidst a flurry of challenging puzzles, Spain basks in the glory of being the driving force behind Europe’s economic boom.
