It’s a chilly mid-winter afternoon in Segovia, central Spain, where tourists gather at the foot of the city’s iconic Roman aqueduct. With its towering arches framed against the crisp sky, visitors from across Europe, Asia, and Latin America capture selfies, drawn by Segovia’s historic charm, rich gastronomy, and breathtaking landscape nestled just beyond the mountains north of Madrid.
“There was a moment during Covid when I thought, ‘maybe tourism will never, ever be like it was before,'” reflects Elena Mirón, a local guide adorned in a vibrant fuchsia beret, preparing to lead a group through the city’s cobbled streets. “But now things are very good, and I feel this year is going to be a good year, like 2023 and 2024. I’m happy because I can live off this job I love.”
Spain received a record-breaking 94 million visitors in 2024, closing in on France’s 100 million and positioning itself as one of the world’s top tourist destinations. The resurgence of tourism post-Covid is a cornerstone of Spain’s economic boom, propelling the eurozone’s fourth-largest economy ahead of Germany, France, Italy, and the UK, with an impressive GDP growth of 3.2% in 2024.
While Germany’s economy contracted by 0.2%, France grew by a modest 1.1%, Italy by 0.5%, and the UK by an expected 0.9%, Spain’s robust performance earned it the title of the world’s best-performing economy, according to The Economist.
“The Spanish model is successful because it is a balanced model, and this guarantees sustainable growth,” explains Carlos Cuerpo, Spain’s business minister in the Socialist-led coalition government. Spain accounted for 40% of the eurozone’s growth in 2024, thanks to its diversified economy.
Tourism is pivotal, but financial services, technology, and strategic investments have also fueled Spain’s recovery from the pandemic’s devastating blow, which saw an 11% GDP contraction in a single year. Cuerpo highlights that Spain is emerging from the crisis without lasting scars, modernizing its economy and enhancing its potential for future growth.
Spain’s transformation is bolstered by the EU’s Next Generation recovery funds, from which it is set to receive up to €163 billion by 2026, making it the largest beneficiary alongside Italy. These funds are being channeled into national rail improvements, low-emission zones, the burgeoning electric vehicle industry, and subsidies for small businesses.
“Public spending has been high, responsible for approximately half of our growth since the pandemic,” notes María Jesús Valdemoros, an economics lecturer at IESE Business School.
Unlike other European economies heavily reliant on industry, Spain’s diverse economic base has shielded it from global headwinds such as high energy costs, competition from Asia, and trade protectionism. The country faced challenges, including the cost-of-living crisis triggered by supply-chain disruptions and the Russian invasion of Ukraine in 2022, which spiked inflation to 11% by July 2022. However, by the end of 2024, inflation had eased to 2.8%.
Government measures, such as fuel subsidies, public transport incentives, and minimum wage hikes, mitigated the crisis’s impact. The “Iberian exception” negotiated with Brussels allowed Spain and Portugal to cap gas prices for electricity generation, providing relief during the energy crisis.
Spain’s green energy output, the second-largest in the EU, not only ensures energy security but also attracts investments. As Europe’s second-largest car producer, Spain sees vast potential in electric vehicle production, despite trailing behind some competitors. Wayne Griffiths, CEO of Seat and Cupra, emphasizes Spain’s competitive workforce and supportive energy policies, essential for sustainable automotive growth.
Spain’s historically high unemployment remains a challenge, though significant progress has been made. The jobless rate fell to 10.6% by late 2024, the lowest since 2008, with employment reaching a record 22 million. Labour reforms promoting permanent contracts over temporary ones have enhanced job stability without hindering job creation.
Immigration, despite political controversies, plays a vital role in countering Spain’s ageing population and sustaining its workforce. Prime Minister Pedro Sánchez champions immigrants’ contributions as fundamental to Spain’s economic vitality.
While Spain leads the EU in economic growth, challenges persist. Over-reliance on tourism, public debt exceeding annual economic output, and a burgeoning housing crisis demand urgent attention. Valdemoros warns that fiscal imbalances could threaten financial stability.
Political polarization complicates reforms, but for now, Spain relishes its role as Europe’s economic powerhouse.
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