## Spain’s Shift to Success

## Source details

**Canonical URL:** [Spain’s Shift to Success](https://www.imf.org/en/publications/fandd/issues/2025/06/spains-shift-to-success-carlos-cuerpo)

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- [Markdown version](/en/publications/fandd/issues/2025/06/spains-shift-to-success-carlos-cuerpo/index.md)
- [Structured JSON version](/en/publications/fandd/issues/2025/06/spains-shift-to-success-carlos-cuerpo/index.json)
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## Bibliographic details
- Authors: CARLOS CUERPO
- Published: June 2, 2025

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### Overview
- 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."

### Labor market and social inclusion
- 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 sector and competitiveness
- 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.

### Fiscal stance and macroeconomic sustainability
- 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.

### Recovery funds, investment, and 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."

### Policy priorities and remaining challenges
- 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.*

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## Content in this bundle

- **Our Shift to Success**
  - [Our Shift to Success (Markdown version)](/-/media/files/publications/fandd/article/2025/06/cuerpo.pdf.md){rel="alternate" type="text/markdown"}
  - [Our Shift to Success (PDF)](/-/media/files/publications/fandd/article/2025/06/cuerpo.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/fandd/issues/2025/06/spains-shift-to-success-carlos-cuerpo_