Spain’s Shift to Success

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Spain emerged from recent international shocks with "strong and balanced growth" and "without permanent scars."
The COVID-19 shock led to an "11 percent drop in economic output in 2020."
Spain was "the world’s fastest-growing major developed economy in 2024," contributing "about half of the overall growth in the euro area" while representing "only a tenth of its GDP."
Spain was "the only major advanced economy to have its 2025 growth projection revised up by the IMF in its latest outlook, in April."

Policy response emphasized social protection rather than austerity, including furlough programs and public credit:
- Furlough programs supported "nearly 3.4 million workers at their peak."
- Public credit lines bridged liquidity for "over 674,000 mostly small- and medium-sized firms."
Labor market reform:
- A "sweeping reform in 2021" broadened permanent hire options, contributing to record job creation.
- Spain generated "more new employment than France and Germany combined" in the referenced year.
Immigration and workforce:
- "Two-thirds of new workers in 2019–24 were foreign-born," mostly from Latin America.
Job quality and sectoral shifts:
- Job creation in high-value sectors such as information and communications technology expanded "at twice the pace of overall employment" over the past two years.
- Temporary employment "has dropped sharply to converge with the EU average."
Wage and income measures:
- Repeated increases in the minimum wage totaling "61 percent since 2018."
- Spain has "the lowest wage inequality among developed economies," according to the International Labour Organization.
- Measures such as a "minimum vital income" contribute to greater economic equity.
- Spaniards are "recovering their purchasing power at a faster pace than their euro area peers," according to the OECD.

External balances and resilience:
- Spain recorded "our highest-ever balance of payments surplus last year, equivalent to 4.2 percent of GDP."
- Spain is not overreliant on foreign capital to finance growth, reducing bubble risk seen in past real estate crises.
Tourism and exports:
- Spain welcomed "a record 84 million visitors last year."
- Non-tourism exports (financial services, IT, professional consulting) generated "more than €100 billion last year," and have recently overtaken tourism as a driver of growth.
Foreign direct investment and greenfield projects:
- Between 2018 and 2024, Spain was "the world’s fifth-largest recipient of greenfield projects," according to the Financial Times investment tracker.
Energy transition:
- Share of electricity from renewable sources increased from "just over 20 percent in 2019 to 56 percent last year."
- Spain's central bank attributes this change to lowering electricity prices by "40 percent," enhancing competitiveness, strategic autonomy, and energy independence.

Public debt and deficit improvements:
- Debt-to-GDP ratio has dropped "by more than 22 percentage points from its peak during the worst of the pandemic in 2021," moving "inch(ing) closer to 100 percent."
- Budget deficit is down "by 7 percentage points" and has "fallen below the EU’s official threshold of 3 percent for the first time in six years."
Market confidence and sovereign financing:
- Fiscal discipline has resulted in "record demand for our sovereign bonds, contained credit costs, and a string of credit rating upgrades."
Compatibility of fiscal responsibility with social protection is emphasized as key to social acceptance of reforms.

Postpandemic recovery plan effects:
- Recovery funds are "expected to add 3.4 percent to GDP by 2031, compared with a no-plan counterfactual scenario."
- Spain has "already invested almost €50 billion in the green and digital transitions."
Reforms implemented:
- Measures to "reduce red tape, enhance the business environment, improve digitalization and innovation, promote the green transition, and reinforce social protection."

Prioritized actions:
- Continue reducing unemployment.
- Improve training opportunities and align them with business needs.
- Lower inequalities and promote equitable opportunities for all.
- Solve the housing challenge to ensure access to affordable homes, especially for young people.
Framing:
- The government frames the model as "balanced and sustainable growth" reconciling "efficiency and competitiveness with environmental sustainability, social inclusion, and fiscal responsibility."

Carlos Cuerpo, "Spain’s Shift to Success," F&D Magazine, June 2025.

Our Shift to Success
- Our Shift to Success (Markdown version)
- Our Shift to Success (PDF)