{"id":212548,"date":"2025-06-25T07:24:17","date_gmt":"2025-06-25T07:24:17","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/212548\/"},"modified":"2025-06-25T07:24:17","modified_gmt":"2025-06-25T07:24:17","slug":"spain-post-pandemic-champion-global-finance-magazine","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/212548\/","title":{"rendered":"Spain: Post-Pandemic Champion | Global Finance Magazine"},"content":{"rendered":"

Spain\u2019s economy keeps outpacing Europe, thanks to tourism, immigration, and a budding pharma sector. But tariff threats and structural challenges loom.<\/p>\n

Since the Covid-19 pandemic peaked in 2021, the Spanish economy has consistently outperformed the rest of Europe, and economists expect it to outshine its peers this year once again. That doesn\u2019t mean the country is immune to global headwinds, however, including the tariff disruptions and trade tensions that Washington ignited in April, and by 2026, GDP growth is seen slowing significantly from its current lively pace.<\/p>\n

\u201cWe already know that economic growth in the first quarter of 2025 was very strong. That\u2019s a solid starting point,\u201d says Miguel Cardoso, chief economist for Spain at BBVA Research. First-quarter GDP, published at the end of April, was 0.6%, quarter on quarter.<\/p>\n

Over the past five years, Spain has drawn international attention for its robust growth compared with neighboring countries. A combination of strong domestic demand\u2014driven by tourism, immigration, and public spending\u2014has fueled a much-needed expansion while the country\u2019s standard of living has edged closer to that of wealthier European nations.<\/p>\n

\"MiguelMiguel Cardoso<\/strong>, Chief Economist, BBVA<\/strong> <\/p>\n

Since 2021, when Spain began recovering from a steep contraction, GDP growth has consistently outpaced the broader eurozone. Last year, it notched 3.2% compared to 0.7% for the eurozone.<\/p>\n

The International Monetary Fund (IMF) projects Spain\u2019s growth will remain above the eurozone average at 2.5% in 2025, 1.8% in 2026, and a medium-term potential of around 1.7% for subsequent years, but warns of downside risks including escalating trade tensions, increasing domestic political uncertainty, and demographic aging.<\/p>\n

Early on, some economists predicted that Spain\u2019s streak of outperformance would be short, citing structural challenges such as a limited infrastructure capacity, persistently high unemployment, an aging population, and a shortage of innovation-driven, highvalue jobs. So far, however, those forecasts have proven incorrect.<\/p>\n

In late April, a power blackout occurred across the Iberian Peninsula, demonstrating one aspect of weak infrastructure in both Spain and Portugal. Spain has poor connections to the European grid, which make it difficult to share power and balance supply and demand, especially when renewable energy generation fluctuates.<\/p>\n

The day-long blackout \u201cwill probably subtract between 0.1% to 0.2% from GDP growth in second-quarter 2025,\u201d Cardoso predicts, \u201cdepending on whether firms can recover anywhere between 75% to 90% of lost production.\u201d<\/p>\n

Most economists express cautious optimism, anticipating that the impact on Spain of the Trump tariffs and global trade tensions, while not negligible, will remain relatively contained.<\/p>\n

\u201cSpain\u2019s direct exposure to US tariffs is very limited. Exports of goods to the US represent just 1% to 1.5% of Spain\u2019s GDP,\u201d Cardoso notes. \u201cThat\u2019s three to four times less than Germany\u2019s exposure.\u201d<\/p>\n

Exports to the US are concentrated in specific products such as olive oil. According to the EU, Spain exported over 118,000 metric tons of the liquid to the US during the 2023-2024 crop year, with higher volumes expected in the current season thanks to increased availability and lower prices.<\/p>\n

The bigger concern lies in the economy\u2019s indirect exposure to a potential recession in Germany, Europe\u2019s economic powerhouse. \u201cA recession in Germany would be very bad for Spain\u2019s tourism sector,\u201d Cardoso warns.<\/p>\n

Growth Drivers<\/p>\n

In recent years, tourism has been one of the key drivers of Spain\u2019s economic growth. In 2024, the country welcomed a record 94 million international visitors, narrowing the gap with France, which remains the world\u2019s top destination with 100 million. For economists, the question has been when the supply of tourism-related services\u2014such as hotels, bars, and restaurants\u2014would begin to show strain under rising demand.<\/p>\n

So far, however, tourism continues to expand, stretching into off-peak seasons and reaching less traditional destinations.<\/p>\n

\u201cData through March show that foreign spending in Spain is still growing at double-digit rates. Credit card spending by foreigners rose 12% to 13% year-on-year in the first quarter,\u201d Cardoso notes.<\/p>\n

Tourism patterns are also shifting, he says, as travelers take shorter, more frequent trips rather than the traditional, fixed-period family holidays. The change is enabling a more efficient use of tourism infrastructure, he says.<\/p>\n

But growth in demand could still hit a limit in the number of hotels, restaurants, and other structures available.<\/p>\n

\u201cThere are already signs of price pressures, and infrastructure will soon reach its limits,\u201d says Sergi Jim\u00e9nez-Mart\u00edn, professor of Economics at Pompeu Fabra University in Barcelona. \u201cI wouldn\u2019t 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.\u201d<\/p>\n

Tourism is a low-productivity, lowvalue-added sector, he argues, and redirecting employment toward other areas could lead to a more efficient and healthier economy.<\/p>\n

Another element behind Spain\u2019s recent outperformance is immigration.<\/p>\n

\u201cThe Spanish economy expanded significantly, partly because the Covid-19 shock was so severe but also because of strong population growth, with about 2 million new residents, mostly from Latin America,\u201d Jim\u00e9nez-Martin says. Shared language and cultural ties have helped make immigration a net benefit for the economy, he adds, and while the new residents have often been low- or middle-qualified workers, a more promising expansion would be in different high-value growth sectors.<\/p>\n

The pharmaceutical industry stands out as a success story. Accounting for some 1.5% of GDP and employing about 170,000 people in high-value jobs, it plays a still-small but promising role in the economy.<\/p>\n

Spain is already one of the world leaders in clinical research. Since last year, it has ranked first in Europe, conducting nearly 1,000 clinical trials annually and surpassing Germany for the first time. Coming as countries like Germany and Belgium are seeing declines, this growth is driven by tax incentives, a cost-effective and skilled workforce, and a relatively fast regulatory process.<\/p>\n

\u201cSpain has some of the world\u2019s fastest approval times,\u201d says Oscar Salamanca, CEO of \u00c1pices CRO, which provides support for clinical trials, and president of the Spanish Association of Contract Research Organizations (ACRO). \u201cThe 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 and two to three times lower than in much of Europe.\u201d<\/p>\n

These advantages have attracted global pharmaceutical giants like Novartis, Roche, and AstraZeneca, to establish research centers in Spain: particularly in Madrid and Barcelona, with additional hubs in Valencia, Seville, M\u00e1laga, and Santiago de Compostela.<\/p>\n

Long-Term Worries<\/p>\n

While tourism and pharmaceuticals, each in its own way, point toward future economic growth, a relatively low level of investment\u2014mostly due to regulation and uncertainties\u2014has many economists worrying that high public debt and an uncertain political landscape will cause Spain to hit its infrastructural limits in the coming years.<\/p>\n

The government of Prime Minister Pedro S\u00e1nchez is a coalition between the socialist PSOE and other political forces to its left, including the main Catalan nationalist party. A new general election is to be held by August 2027.<\/p>\n

Public debt level as a percentage of GDP was 101.8% at the end of last year. According to the latest IMF report, Spain\u2019s debt remains vulnerable to growth and financing cost shocks.<\/p>\n

\u201cGiven still-high debt and the economy\u2019s strong cyclical position,\u201d the IMF recommended in its April report, \u201cthere is a case for frontloading the authorities\u2019 planned adjustment, strengthening the national fiscal framework to ensure that regions contribute to the consolidation effort, and adopting employmentfriendly measures to address the projected growing gap between pension expenditures and social security contributions.\u201d<\/p>\n

Among the IMF\u2019s suggested moves are harmonizing VAT rates and strengthening green taxation: measures that could replace a less effective banking tax that was introduced three years ago and could now be phased out.<\/p>\n

The IMF praised Spain\u2019s financial system and the stability of its banks. BBVA\u2019s plan to merge with smaller rival Banco de Sabadell moved one step forward on April 30, when the National Authority for Markets and Competition (CNMC) approved the deal under certain conditions, although other authorizations are still required.<\/p>\n

While Spain has undoubtedly been a post-Covid success story, the IMF stressed that to stay on this positive trajectory, maintaining sound fiscal and regulatory policies and avoiding missteps that could derail progress will be essential.<\/p>\n","protected":false},"excerpt":{"rendered":"Spain\u2019s economy keeps outpacing Europe, thanks to tourism, immigration, and a budding pharma sector. But tariff threats and…\n","protected":false},"author":2,"featured_media":212549,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5312],"tags":[2000,299,104],"class_list":{"0":"post-212548","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-spain","8":"tag-eu","9":"tag-europe","10":"tag-spain"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114742812285142537","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/212548","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=212548"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/212548\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/212549"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=212548"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=212548"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=212548"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}