Spain has become Europe's standout economy, says the FT

SPAIN has emerged as Europe’s star economic performer, growing at triple the rate of the Eurozone, according to a Financial Times editorial.

Since the start of 2024, the Spanish economy has expanded at an average annual rate of 3%, compared with just over 1% for the Eurozone.

The impressive performance has prompted S&P Global Ratings to upgrade Spain’s credit rating, whilst the Bank of Spain has raised its 2025 growth forecast to 2.6%.

The FT’s editorial board declared Spain ‘a rare bright spot among Europe’s otherwise drearily performing economies’, positioning it as the fastest-growing major economy in Europe and one of the strongest in the advanced world.

Several factors have driven the boom. Tourism has bounced back from the pandemic, whilst the government has been investing EU grants from the Next Generation EU fund into infrastructure improvements. Spain is the second largest beneficiary of the scheme.

Cheap renewable energy has also attracted foreign direct investment, and earlier labour reforms from 2021 have boosted employment stability.

But the biggest engine of growth has been immigration. Whilst other European nations have tightened their borders, Spain has adopted a more liberal approach, averaging a net annual inflow of about 600,000 immigrants since 2022.

The bulk have been of working age, pushing employment to record highs and helping Spain avoid the severe skills shortages plaguing other European countries.

About 70% of new arrivals in 2023 came from Latin America, with shared language and cultural similarities aiding their integration into the labour market and broader society.

Spain has recently simplified legal immigration routes and plans to grant residency and work permits to more undocumented migrants.

However, the FT warns that this immigrant-led boom must be carefully managed. Whilst Spain’s real GDP has risen by about 6.8% since 2019, in per capita terms it has grown by just 3.1%.

Migrants have mainly filled gaps in lower value-added sectors like hospitality and construction, meaning individual living standards haven’t kept pace with headline growth figures.

The International Monetary Fund recommends Spain streamline regulations and provide tax incentives to boost small businesses and attract investment in high-end service sectors.

Spain’s unemployment rate remains the highest in the EU, despite the economic growth.

The FT also highlighted potential social tensions that could threaten the sustainability of high immigration flows.

Whilst most Spanish people currently support immigration, the newspaper warned that inadequate support for affordable housing and public services could erode this openness.

Rents are already unaffordable for many, and there have been episodes of unrest between locals and people of North African origin.

Spain’s fragmented political environment poses another obstacle. Prime Minister Pedro Sanchez’s scandal-hit minority government has struggled to pass major legislation, potentially hampering efforts to build on economic progress.

The FT concluded that Spain has shown other advanced economies how immigration can be an important source of economic resilience.

But to remain an exemplar, the country needs to turn its demographic windfall into lasting prosperity through productivity improvements and proper infrastructure support.

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