Spain’s Economic Resilience: Leading Growth in Europe Despite Global Headwinds

Economic Powerhouse in the Eurozone

Despite a complex and uncertain international geopolitical context, Spain’s economic outlook remains favourable, with the economy maintaining its dynamism and continuing to lead growth among the main eurozone economies.

Strong Growth and Employment

Real GDP growth is expected to reach 2.6% in 2025, with domestic demand remaining the key driver of economic growth, powered by private consumption and projected investment pickup.

The labour market shows remarkable strength, with recent data confirming 520,000 new employees and total employment exceeding 22 million for the first time in seasonally adjusted terms.

Tourism and Investment Boom

The tourism sector is experiencing significant growth, with forecasts indicating tourist spending will exceed €20 billion in March and April 2025, representing a 13% increase from 2024. International tourist arrivals are expected to reach 15 million, 9% higher than the previous year.

Major investments are transforming the industrial landscape, including the PowerCo gigafactory project with a €3 billion investment, expected to generate over 20,000 direct and indirect jobs. This project has received more than €260 million from the PERTE VEC initiative, which has allocated €2,500 billion to innovation and development projects in the Spanish motor sector.

Inflation and Fiscal Outlook

Inflation continues its downward trend, with annual HICP inflation projected to slow down in 2025, mainly due to decelerating energy prices. Headline inflation is expected to reach 2.3% in 2025, before further easing to 1.9% in 2026.

The government maintains its commitment to fiscal responsibility, with a deficit target of 2.5% for 2025. According to Minister Carlos Cuerpo, once interest expenditure on debt is excluded, the country will achieve a budget surplus.

Challenges and Future Outlook

The main downside risks relate to potential economic slowdown in the euro area and Spain’s main trading partners, particularly those with high exposure to US markets. This could impact Spanish activity through disrupted export markets and affect corporate investment decisions.

Despite these challenges, the outlook remains positive with projected job creation of almost 2 million positions through 2028. The combination of labour market improvements, expected salary growth, decelerating inflation, and strong household finances is anticipated to enhance citizens’ purchasing power.