Bank of Spain, Madrid. Credit: Miguel Arcanjo Saddi, Shutterstock
Spain’s post-pandemic economic performance continues to outshine the rest of Europe, fuelled by booming tourism, immigration, and a fast-growing pharmaceutical industry, as reported by Global Finance.
But with power grid weaknesses, political uncertainty, and global trade tensions looming, some experts question how long the momentum will last.
Spain’s GDP growth still beats eurozone average
Spain’s economy grew 0.6 per cent in the first quarter of 2025, according to BBVA Research, with chief economist Miguel Cardoso calling it “a solid starting point” (Cited by Global Finance.)
That’s on top of Spain’s strong performance in 2023, when GDP grew 3.2 per cent compared to the eurozone’s 0.7 per cent. The International Monetary Fund (IMF) forecasts continued above-average growth: 2.5 per cent in 2025 and 1.8 per cent in 2026, before slowing to a medium-term potential of 1.7 per cent.
But warning signs persist. A widespread power blackout across the Iberian Peninsula in April highlighted Spain’s weak infrastructure links to the rest of Europe. Cardoso predicts this alone “will probably subtract between 0.1 to 0.2 per cent from GDP growth in second-quarter 2025,” depending on how much production is recovered.
Tourism boom keeps Spanish economy afloat
Tourism remains the backbone of Spain’s economy. A record-breaking 94 million visitors arrived in 2024, just shy of France’s 100 million. And that influx is spending big. Cardoso said, “Credit card spending by foreigners rose 12 to 13 per cent year-on-year in the first quarter.”
But cracks are beginning to show. With infrastructure reaching its limits, economist Sergi Jiménez-Martín of Pompeu Fabra University warned, “There are already signs of price pressures… I wouldn’t mind seeing a negative shock to tourism, as it could ultimately benefit the economy by encouraging more semi-skilled youth and immigrants to shift into other industries.”
Immigration and pharma boost Spain’s growth
Spain has added around 2 million new residents, mostly from Latin America. “Shared language and cultural ties have helped make immigration a net benefit for the economy,” said Jiménez-Martín.
Meanwhile, Spain’s pharmaceutical industry, though still modest, is punching above its weight. It accounts for 1.5 per cent of GDP and supports around 170,000 jobs. Spain is now Europe’s leader in clinical trials, surpassing Germany.
Oscar Salamanca, CEO of Ápices CRO, noted, “The time to treat the first patient is usually 90 to 100 days, compared to up to 300 in other countries… Costs are also much lower: up to five times less than in the US.”
Big players like AstraZeneca, Roche and Novartis are investing heavily in Spanish research hubs from Madrid to Málaga.
Debt, tariffs, and political risks cast shadows on Spain’s economy
Despite strong GDP numbers, Spain’s public debt is worryingly high at 101.8 per cent of GDP. The IMF has urged the government to “frontload the authorities’ planned adjustment” and called for a stronger fiscal framework, VAT harmonisation, and “employment-friendly measures” to balance future pension costs, according to Global Finance.
Trade tensions – particularly Trump’s US tariffs – pose limited direct risk. “Spain’s direct exposure to US tariffs is very limited,” said Cardoso. “Exports of goods to the US represent just 1 to 1.5 per cent of Spain’s GDP.”
Spain’s government, led by Pedro Sánchez’s PSOE and supported by regional parties, faces a general election by August 2027.
Spain’s economic story has been one of surprising resilience, but can it continue outperforming Europe?
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