By In\u00e9s Fern\u00e1ndez-Pontes and\u00a0Thomas Moller-Nielsen<\/p>\n
(EurActiv<\/a>) \u2014 There are many misconceptions about Spain. Most Spaniards, for instance, never take siestas. Sangria is not the country\u2019s favourite drink. And almost no one regularly attends bullfights.<\/p>\n Arguably the biggest misconception of all \u2013 one which many newspapers, politicians, and even economists<\/a>\u00a0have recently fallen victim to \u2013 is that Spain\u2019s economy, the EU\u2019s fourth-largest, is \u201cbooming<\/a>\u201d. According to numerous key metrics, including productivity growth, unemployment, and (most tellingly) surveys of the country\u2019s actual citizens, it isn\u2019t.<\/p>\n But that\u2019s not what the most commonly used economic measure says. In fact, the scores of articles hailing Spain\u2019s \u201cmiracle<\/a>\u201d economy are overwhelmingly based on the fact that the country\u2019s GDP \u2013 the total value of its produced goods and services \u2013 is rapidly increasing.<\/p>\n Compared to other EU countries, it is true that Spain\u2019s GDP growth has been\u00a0extraordinario\u00a0in recent years.\u00a0CaixaBank<\/a>, the country\u2019s largest domestic lender, reported earlier this week that Spain\u2019s output has risen 10% since 2019, well above the eurozone average of 6.4% and a whopping one hundred times more than\u00a0Germany\u2019s<\/a>\u00a0anaemic 0.1% expansion.<\/p>\n The swift growth also shows little sign of subsiding. Earlier this month, the\u00a0European Commission<\/a> and the\u00a0Bank of Spain<\/a>\u00a0both hiked their Spanish growth forecasts for this year to 2.9% \u2013 more than double the EU\u2019s 1.4% average projected expansion.\u00a0\u201cReal GDP growth is expected to remain strong in 2025,\u201d the Commission noted, adding that \u201ceconomic activity\u201d is also expected to \u201cremain robust\u201d until 2027.<\/p>\n But as Jos\u00e9 Bosc\u00e1, an economist at the FEDEA think tank in Madrid, points out, Spain\u2019s GDP data \u201cis not so promising\u201d when adjusted for its population growth, which has also swelled in recent years.\u00a0\u201cIf we only assess economic growth based on GDP data, there are factors that we are not taking into consideration,\u201d Bosc\u00e1 said.<\/p>\n Indeed, Spain\u2019s GDP growth is largely a\u00a0direct consequence\u00a0of its growing population. Soaring immigration \u2013 especially from Latin America \u2013 has caused Spain\u2019s overall population to surge in recent years, and, predictably, has also caused its total output and consumption to rise.<\/p>\n According to the\u00a0Elcano Royal Institute<\/a>, the country\u2019s immigrant population has risen by roughly 600,000 people per year since the end of the pandemic, pushing its population to a record high of just under 50 million. Roughly one in five people now living in Spain were born abroad.<\/p>\n In addition to boosting net output, the influx of workers has boosted government revenue and, by tempering wage rises, has helped keep inflation barely a fraction above the European Central Bank\u2019s 2% target rate.<\/p>\n But it has also exacerbated Spain\u2019s chronic shortage of affordable housing and compounded the country\u2019s cost-of-living crisis \u2013 especially for young people, the vast majority of whom still live with their parents and a quarter of whom are currently unemployed.\u00a0According to the latest\u00a0available<\/a> data from Eurostat, the average Spaniard only leaves home at the age of 30: well above the bloc\u2019s average of 26.<\/p>\n The wave of immigration has also made it increasingly difficult for Spain to reduce its overall rate of joblessness, which at\u00a010.45%<\/a>\u00a0remains the highest in the EU. Nine in ten jobs created between January 2024 and March 2025 were filled by foreign workers, the Elcano Institute notes. Many Spaniards who are employed have seen tepid real wage growth for decades, constricting their buying power \u2013 and in many cases their motivation.\u00a0<\/p>\n Such factors explain why Spain\u2019s economic \u201cmiracle\u201d is overwhelmingly not being felt by its citizens. A recent poll by the Funcas research centre\u00a0revealed<\/a>\u00a0that 55% of Spaniards think that the economic situation is worse than before the pandemic, while 90% believe they have lost purchasing power.<\/p>\n Luz<\/strong>\u00a0at the end of the tunnel?<\/strong><\/p>\n Immigration is not the sole reason for Spain\u2019s rapid growth rate. A surge in post-pandemic tourism is also a major factor, as is the country\u2019s broader\u00a0shift<\/a>\u00a0toward high-value-added service sectors, including real estate, finance, and IT.<\/p>\n \u201cIt\u2019s not just tourism, it\u2019s also non-tourism services,\u201d Finance Minister Carlos Cuerpo told\u00a0CNBC<\/a>earlier this year.\u00a0The fact that Spain\u2019s \u20ac100 billion in annual non-tourism export services now exceeds its \u20ac95 billion in tourism exports also underscores the \u201cmodernisation of the Spanish economy,\u201d he said.<\/p>\n Foreign investors, including Chinese battery manufacturer\u00a0CATL<\/a>\u00a0and auto giant Stellantis, have been drawn by Spain\u2019s relatively cheap energy, with the country\u2019s bountiful sunlight increasingly being harnessed by manufacturers through investments in solar power.<\/p>\n Payouts from the EU\u2019s pandemic recovery fund have also contributed. Madrid is\u00a0on course<\/a>\u00a0to receive a total of \u20ac163 billion in grants and loans from Brussels by the end of next year: the second-highest amount in the bloc, after Italy.<\/p>\n But profound structural obstacles remain. These include high government debt-to-GDP levels inherited from the eurozone crisis and pandemic; widespread unemployment; and political instability partly engendered by Prime Minister Pedro S\u00e1nchez\u2019s minority government, which has been\u00a0mired in corruption scandals<\/a>\u00a0involving his inner circle. Due to the political dysfunction, Spain hasn\u2019t managed to pass a new budget since 2022, forcing the government to rollover the 2023 budget, even as its booming population and robust tax revenues have created a new reality in the country.\u00a0<\/p>\n