Spain flag Spain: Economic outline

Economic Outline

Economic Indicators

Spain has been in the midst of a balanced economic recovery in recent years; although the COVID-19 crisis led the country into an unprecedented downturn in economic activity, with the deepest contraction among EU member states. Nevertheless, the Spanish economy recovered well from the crisis, growing by 5.8% in 2022 and an estimated 2.5% in 2023, driven by external and domestic demand, benefiting also from a strong carry-over from 2022 and a marked improvement in the terms of trade. Domestic demand, driven by increased real income for households and ongoing relief from price pressures, should be the key growth driver this year. The extended implementation of the Recovery and Resilience Plan, coupled with a faster disbursement to ultimate recipients, is projected to bolster investment, particularly in machinery and equipment. Consequently, GDP is predicted to grow by 1.7% in 2024 (still above eurozone average), with a slight acceleration to 2% in 2025 according to the EU Commission, as the recently approved RRF loan component adds further impetus to growth-oriented expenditures.

In 2023, the anticipated decline in the general government deficit was projected to be more gradual compared to the preceding years. Despite robust personal income tax revenues, overall tax revenues are exhibiting signs of moderation after a period of buoyant growth, primarily due to lower-than-expected growth in indirect tax revenues, influenced by the slowdown in the inflation of imported goods. On the expenditure side, the increase in current expenditure was propelled by rising pension costs linked to inflation indexation and growing intermediate consumption. Additionally, the government approved two additional packages of measures, costing an estimated EUR 2.7 billion (0.2% of GDP), aimed at alleviating the impact of high energy prices. These measures included an extension of the VAT reduction for basic food items and direct support for the road and maritime transport sectors. Overall, the budget deficit was estimated at 3.9% of GDP last year, with a further reduction expected in 2024 (2.9%) due to savings from the phasing out of energy-related measures. The trajectory for the debt-to-GDP ratio in 2023 indicated a decline, reaching 107.3% (from 111.6% one year earlier), which should continue over the forecast horizon. This stabilization is attributed to the diminishing favorable gap between nominal GDP growth and the cost of servicing debt. In 2023, HICP inflation saw a reduction to 3.6%, primarily influenced by the ongoing moderation of the energy component. For 2024, there is an anticipated further slowdown in HICP inflation to 3.4%, even with the upward pressure resulting from the expected phasing out of government measures implemented in preceding years to counter the impact of high energy prices. As we move into 2025, HICP inflation is forecasted to average 2.1% (data EU Commission).

The labor market was resilient in 2023, supported by sustained job creation and a decrease in the proportion of temporary employees in the private sector, despite a slowdown in employment growth observed since the summer. The unemployment rate was estimated at 11.8% in 2023 and is expected to continue improving in the forecast period, reaching 11.3% and 11.1% in 2024 and 2025, respectively (IMF). Wages are anticipated to experience a moderate increase, aligning with the thresholds outlined in the multi-year agreement signed last May, with no significant impact on cost-competitiveness. Spain remains a country with strong inequalities: according to the latest data by Eurostat, 26% of the population is at risk of poverty or social exclusion (the fourth-highest level in the EU), despite a relatively high GDP per capita (USD 50,472 in 2023 – IMF).

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 1,418.921,581.151,647.111,715.581,772.09
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 29,80033,07134,04535,07235,852
General Government Balance (in % of GDP) -4.5-3.7-3.2-3.2-3.3
General Government Gross Debt (in % of GDP) 111.6107.5106.3104.9105.0
Inflation Rate (%)
Unemployment Rate (% of the Labour Force) 12.912.111.611.311.0
Current Account (billions USD) 8.6841.1141.7040.3834.40
Current Account (in % of GDP)

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 GHS

Source: World Bank, 2015


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Latest Update: June 2024