The Spanish economy continues to exceed Europe, thanks to tourism, immigration and a grass pharmaceutical sector. But pricing threats and structural challenges are looming.
Since the Covid-19 pandemic culminated in 2021, the Spanish economy systematically surpassed the rest of Europe and economists expect it again to surpass its peers this year. This does not mean that the country is immune to the world’s opposite winds, including pricing disturbances and trade tensions that Washington ignited in April, and in 2026, GDP growth is considered to slowly slow down its current rate.
“We already know that economic growth in the first quarter of 2025 has been very strong. This is a solid starting point, ”explains Miguel Cardoso, chief economist from Spain to BBVA Research. The first quarter’s GDP, published at the end of April, was 0.6%, quarter in quarter.
Over the past five years, Spain has drawn international attention to its robust growth compared to neighboring countries. A combination of high domestic demand – directed by tourism, immigration and public spending – has fueled an essential expansion while the standard of living in the country has come closer to that of the richest European nations.
Since 2021, when Spain has started to recover from a strong contraction, GDP growth has constantly exceeded the broader euro zone. Last year, he scored 3.2% against 0.7% for the euro zone.
The International Monetary Fund (IMF) projects the growth of Spain will remain above the average of the euro zone at 2.5% in 2025, 1.8% in 2026, and a medium-term potential of around 1.7% for the following years, but warns lower risks, including the climbing of trade tensions, the increase in internal political uncertainty and demographic aggression.
At the beginning, some economists predicted that the Spain outcry sequence would be short, invoking structural challenges such as a limited infrastructure capacity, high persistent unemployment, an aging population and a high -value job of innovation focused on innovation. Until now, however, these forecasts have proven to be incorrect.
At the end of April, a power failure occurred in the Iberian peninsula, demonstrating an aspect of low infrastructure in Spain and Portugal. Spain has poor connections with the European network, which makes it difficult to share energy and balance of supply and demand, in particular when the production of renewable energy fluctuates.
The power failure of one day “probably removed between 0.1% and 0.2% of GDP growth in the second quarter of 2025”, predicts Cardoso, “depending on that companies can recover between 75% and 90% of the loss of production”.
Most economists express prudent optimism, providing that the impact on Spain of Trump prices and global trade tensions, although not negligible, will remain relatively contained.
“The Direct Exhibition of Spain at American prices is very limited. “It is three to four times less than the exhibition of Germany.”
Exports to the United States is concentrated in specific products such as olive oil. According to the EU, Spain has exported more than 118,000 metric tonnes of liquid to the United States during the 2023-2024 sparkling year, with higher volumes expected in the current season thanks to increased availability and lower prices.
The greatest concern lies in the indirect exposure of the economy to a potential recession in Germany, European economic power. “A recession in Germany would be very bad for the Spanish tourism sector,” warns Cardoso.
Growth engines
In recent years, tourism has been one of the main drivers of Spain’s economic growth. In 2024, the country hosted a record of 94 million international visitors, reducing the gap with France, which remains the main destination in the world with 100 million. For economists, the question is when the offer of tourist services – such as hotels, bars and restaurants – would begin to show the pressure under increasing demand.
Until now, however, tourism continues to develop, extending into out -of -tip seasons and reaching less traditional destinations.
“Data until March show that foreign expenses in Spain are still increasing at two -digit rates.
Tourist models also change, he says, because travelers make shorter and more frequent trips rather than traditional family holidays with fixed periods. Change allows more effective use of tourism infrastructure, he says.
But demand growth could still reach a limit in the number of hotels, restaurants and other available structures.
“There are already signs of pressures on prices, and infrastructure will soon reach its limits,” explains Sergi Jiménez-Martín, professor of economics at Pompeu Fabra University in Barcelona. “I wouldn’t mind seeing a negative shock for tourism, because it could ultimately benefit the economy by encouraging young people and immigrants more half-whom to transform into other industries.”
Tourism is a low-productivity and low added sector sector, he maintains, and the redirection of employment to other fields could lead to a more efficient and healthier economy.
Another element behind the recent outperformance of Spain is immigration.
“The Spanish economy has widened considerably, in part because the COVVI-19 shock was so serious but also due to strong population growth, with around 2 million new residents, mainly from Latin America,” explains Jiménez-Martin. Shared links and cultural ties have contributed to making immigration a clear advantage for the economy, he adds, and although new residents have often been qualified workers with low or average, more promising expansion would be in different high-value sectors of growth.
The pharmaceutical industry stands out as a success. With some 1.5% of GDP and employing around 170,000 people in high -value jobs, it plays a still small but promising role in the economy.
Spain is already one of the world leaders in clinical research. Since last year, he ranked first in Europe, carrying out nearly 1,000 clinical trials per year and exceeding Germany for the first time. As a country like Germany and Belgium see decreases, this growth is motivated by tax incentives, a profitable and qualified workforce and a relatively rapid regulatory process.
“Spain has some of the fastest approval times in the world,” explains Oscar Salamanca, CEO of Ápices CRO, who provides support for clinical trials, and president of the Spanish Association of Research Organizations (ACRO). “Time to treat the first patient is generally 90 to 100 days, compared to up to 300 in other countries. The costs are also much lower: up to five times less than in the United States and two to three times lower than in a large part of Europe. ”
These advantages have attracted world pharmaceutical giants such as Novartis, Roche and Astrazeneca, to establish research centers in Spain: in particular in Madrid and Barcelona, with additional hubs in Valence, Seville, Málaga and Santiago de Compostela.
Long -term concerns
While tourism and pharmaceutical products, each in its own way, point to future economic growth, a relatively low level of investment – due to regulations and uncertainties – there are many economists who worry that a high public debt and an uncertain political landscape will lead to Spain to reach its infrastructure limits in the coming years.
The government of Prime Minister Pedro Sánchez is a coalition between the socialist PSOE and other political forces on its left, including the main Catalan nationalist party. A new general election will be held in August 2027.
The level of public debt in percentage of GDP was 101.8% at the end of last year. According to the latest IMF report, Spain’s debt remains vulnerable to the growth and financing of cost shocks.
“Given the still high debt and the strong cyclic position of the economy,” recommended the IMF in its April report, “there is a case for the frontage of the planned adaptation of the authorities, the strengthening of the national financial framework to ensure that regions contribute to the effort of consolidation and the adoption of employment measures to fill the growing difference between pensions and contributions of social security”.
Among the measures suggested by the IMF are the harmonization of VAT rates and the strengthening of green taxation: measures that could replace a less efficient banking tax that was introduced three years ago and could now be removed.
The IMF welcomed the Spanish financial system and the stability of its banks. The BBVA plan to merge with the smallest Rival Banco in Sabadell took a step forward April 30, when the national authority for the markets and the competition (CNMC) approved the agreement under certain conditions, although other authorizations are always necessary.
Although Spain has undoubtedly been a post-comfortable success, the IMF stressed that to stay on this positive trajectory, maintain good tax and regulatory policies and avoid the missteps that could derail the progress will be essential.