• 2024 closed with GDP growth of 3.2 per cent for Spain, to which immigration contributed 20 per cent.
• Heavy investment in renewables has reduced energy costs and inflation, creating new jobs.
• Spain still faces the challenges of a housing emergency and youth unemployment.

If there is one economy that everyone is watching with keen interest today, it is that of Spain. That was also true before the great financial crisis of 2007–2008, when the Spanish economy seemed poised to become Europe's great promise for the years ahead. Then came the collapse, and few countries suffered its consequences as violently as Spain did. Yet in recent years, with a brief pause during the pandemic, Spain under centre-left governance has posted economic performances unmatched elsewhere, at least among Western nations.

2024 closed with GDP growth of 3.2 per cent, above all expectations and well ahead of other countries enjoying a strong economic moment, such as the United States. Unemployment is also falling, while incomes are rising. There are many reasons behind these positive figures. Immigration and open-door policies play a part, as do heavy investments in renewables and technology, which have reduced dependence on foreign energy while attracting foreign investment into the country. It is a model of economic development light years away from others that have been much discussed in recent months, such as the ultra-liberal Javier Milei's in Argentina. While difficulties there persist and indeed deepen, with the country sinking into poverty, in Spain the economy is soaring. But many challenges remain for the future.

Spain's economic recovery

When the property bubble burst in 2007, triggering one of the worst financial crises in contemporary history, Spain was among the nations to suffer its effects most severely. Its economy, which until that point had been growing strongly, was built precisely on the property market and the construction sector, and from that moment on the Spanish people entered years of great hardship.

In the following decade Spain managed to recover, posting economic growth rates higher than those of other countries badly hit by the crisis, such as Italy and Greece. This was achieved through the measures adopted from 2012 by the centre-right government led by Mariano Rajoy, which reformed the labour market to give businesses greater flexibility and promoted a diversification of the economy. But in many respects Spain remained on fragile ground, weighed down by soaring public debt, stagnant wages and still-high unemployment. When in 2020 the world was hit by the Covid-19 pandemic, Spain was one of the European countries to suffer its worst economic and social consequences. The Spanish economy shrank by 11 per cent in 2020, the worst result among OECD countries, and the country found itself back at square one, in the same critical situation that had followed the 2007–2008 crisis. Today, however, five years after the outbreak of the pandemic, the Spanish economy is flourishing as never before.

2023 closed with economic growth of 2.7 per cent, and in 2024 Spain managed to do even better, with 3.2 per cent — well above expectations at the start of the year and stronger than other countries enjoying a great economic season, such as the United States. The unemployment rate fell from 11.8 to 10.6 per cent, while public debt shed more than three percentage points over the course of 2024, dropping to 101.8 per cent. Today Spain's is the best-performing advanced economy in the world, so much so that the British newspaper The Economist crowned it "Economy of the Year" at the end of 2024. These strong results are partly the natural consequence of recovery in the years following the pandemic, but the policies of Pedro Sánchez's centre-left government — which has led the country since 2018 and is now in its second term — have also been decisive.

The value of immigration

One of the driving forces behind the Spanish economy is immigration. While the far right has taken power in numerous European states, adopting sovereigntist policies and closing borders, Spain under centre-left governance has adopted an open-door philosophy that has offset an ageing population and falling birth rates, giving the economy fresh momentum.

"Spain must choose between being an open and prosperous country or a closed and poor one," Prime Minister Sánchez remarked some time ago. Of the 468,000 jobs created in Spain in 2024, around 85 per cent were filled by migrants or people with dual nationality, who today account for around 13 per cent of the country's workforce. These people have found employment in sectors less sought after by the local population, such as agriculture and construction, but also in the services sector. Today Spain's welfare system is sustained by the contribution of this type of labour force, and according to an analysis by the Bank of Spain, migrant workers contributed 20 per cent to last year's GDP growth of over 3 per cent.

Spain's plan is to attract 25 million new migrants over the next 30 years — a recipe for sustaining this pace of growth. At the end of 2024, a law was passed to regularise hundreds of thousands of migrants through simplified procedures and loosened requirements, while the government is also investing in integration, with measures aimed among other things at preventing migrant labour from becoming concentrated in low-skilled, low-wage employment.

Tourism and renewables

The Spanish economy has posted record figures thanks to the weight of workers with a migrant background, but that is not the whole story. In recent years tourism has returned to growing at rates well above those seen during the pandemic, also thanks to a cost of living lower than that of comparable countries such as Italy. In 2024, 94 million tourists visited Spain, a figure 10 per cent higher than in 2023; they spent around 126 billion euros and contributed to the creation of new jobs, often filled by migrants.

The Spanish government has also adopted a series of measures that have made the ground fertile for the arrival of foreign investment, with large multinationals such as Amazon having relocated much of their operations to Spain, and new startups, above all in the technology sector, that have enriched the local industrial fabric. Against this backdrop, the country has seen its exports grow year on year, particularly in the food industry. Today this positive trend runs counter to the difficulties faced by the other major European countries. The Spanish government has also reformed the labour market, reducing precarious employment, while growth has also been underpinned by the fact that Spain is the second-largest beneficiary of Next Generation EU funds, with nearly 150 billion euros to be spent by 2026, a good portion of which has already been disbursed.

Finally, there is another element not to be underestimated, which concerns the energy transition. In recent years, Spain has pursued an aggressive policy in this direction, which in 2024 led to more than 56 per cent of electricity being generated through wind and solar power, compared to a European average that is ten percentage points lower. In addition to creating new jobs and attracting new foreign investment, especially in large wind farms, all of this has significantly reduced energy costs for Spanish households and businesses, keeping inflation low, with all the positive knock-on effects for the national economy.

Housing crisis and youth unemployment

An unabashed openness to immigration, a labour market reform attentive to workers, and investment in the energy transition are among the Sánchez government's measures that most help explain Spain's extraordinary economic moment. This does not mean, however, that all the challenges have already been overcome.

Perhaps the biggest problem remains housing. The housing emergency is one of the main social difficulties in today's Europe, and in this respect the Spanish situation, particularly in Madrid and Barcelona, is critical. Prices continue to rise, and over the past decade rents have increased by 80 per cent, with tenants now spending 40 per cent of their monthly income on housing, compared to 27 per cent a decade ago. The crisis is deeply felt by the population, and the country has seen repeated protests and demonstrations, particularly against the overtourism that enriches the economy but not the residents. At the start of 2025, the Sánchez government drew up a plan of tax relief for those who rent at prices equal to or below the reference price index, and an increase in taxation for those who use their properties for tourism purposes, by listing them on Airbnb, for example.

The challenges related to housing go hand in hand with other issues, all in some way interconnected. While it is true that unemployment is falling year after year, its rate of 10.6 per cent remains among the highest in Europe, and the figure is even more concerning when it comes to young people. The same applies to per capita income, which has struggled to keep pace with national GDP growth, not least because many of the new jobs have been created in low-productivity, low-wage sectors.

The Sánchez government has in recent years managed to reinvigorate an economy that had emerged badly battered from the Covid-19 pandemic, achieving results that would once have seemed unthinkable. But the work is not yet done.