Guy Hedgecoe
Journalist
Report of Segovia, central spaingetty images
Spain attracts the second largest number of foreign visitors after France
It is a cold winter afternoon in Ségovia, in central Spain, and tourists are gathered at the foot of the Roman aqueduct of the city, looking at its famous arches and taking selfies.
Many visitors are Spanish, but there are also people from other European, Asian and American-American countries, all drawn by the historic charm of Ségovia, gastronomy and dramatic location just beyond the mountains to the north from Madrid.
“There was a moment while I thought that” maybe tourism would never be as before “”, explains Elena Mirón, a local guide dressed in a fuchsia colored beret which is about to direct a group through the city.
“But now things are very good and I think this year will be a happy new year, like 2023 and 2024. I am happy, because I can live from this work that I like.”
Tourist guide Elena Mirón is optimistic about the strength of the Spanish economy
Spain received a record of 94 million visitors in 2024 and is now disputed with France, which has seen 100 million, being the largest foreign tourist center in the world.
And the post-comfortable expansion of the tourism industry is a major reason why the fourth economy of the euro zone easily exceeded people like Germany, France, Italy and the United Kingdom, displaying an increase GDP of 3.2% last year.
On the other hand, the German economy contracted by 0.2% in 2024, while France increased by 1.1%, Italy by 0.5% and the United Kingdom by 0.9% expected .
All of this helps to explain why Economist magazine ranked in Spain as the most efficient economy in the world.
“The Spanish model succeeds because it is a balanced model, and this is what guarantees the sustainability of growth,” explains Carlos Cuerpo, Minister of Affairs of the Coalition Government led by the Socialists. He stresses that Spain was responsible for 40% of the growth of the euro zone last year.
Although he stressed the importance of tourism, Mr. Cuerpo also stressed financial services, technology and investment as factors that helped Spain bounce back from the depths of the pandemic, when GDP has decreased by 11% in one year.
“We come out of covid without scars and modernizing our economy and therefore raising our potential GDP growth,” he adds.
Carlos Cuerpo focuses on the good of the country’s economy = balanced
This modernization process is helped by post-country recovery funds from the EU next generation program. Spain is expected to receive up to 163 billion euros by 2026 ($ 169 billion; 136 billion pounds sterling), making it the largest beneficiary of these funds alongside Italy.
Spain invests money in the national rail system, areas with low issues in cities, as well as in the electric vehicle industry and subsidies for small businesses.
“Public spending has been raised and are responsible for about half of our growth from the pandemic,” said María Jesús Valdemoros, lecturer in economics in Spain Iesse Business School.
Other major European economies have seen their growth thwarted by their greatest dependence than Spain with regard to industry, which, she says, “suffers a lot for the moment due to factors such as high cost Energy, competition from China and other Asian countries, the cost of transition to a more sustainable environmental model and trade protectionism “.
Since Covid, the other major economic challenge for Spain has been the cost of living crisis launched by the bottlenecks of the supply chain and the Russian invasion of Ukraine in 2022. Inflation Culminated at an annual rate of 11% in July of the same year, with energy prices reached the Spanish particularly harshly, but at the end of 2024, it fell to 2.8%.
Madrid believes that the subsidies she introduced to reduce the cost of fuel consumption and encourage the use of public transport was essential to mitigate the impact of energy prices, as well as several minimum wage increases .
At the height of the European energy crisis, Spain and Portugal also negotiated with Brussels an so-called “Iberian exception”, allowing them to cap the price of the gas used to produce electricity in order to reduce the bills of consumers.
Mr. Cuerpo maintains that such measures have helped to counter the traditional vulnerability of Spain to economic disorders.
“Spain is more resilient to successive shocks-including the inflation shock that came with the war in Ukraine,” he said. “And I think that is part of the global protective shield that we have set up for our consumers and our businesses.”
The country’s green energy production is considered to be another favorable factor, not only in the guarantee of electricity, but also in investments. Spain has the second largest renewable energy infrastructure in the EU.
The latter is a boon for a country which is the second largest producer of cars in Europe, according to Wayne Griffiths, CEO of British origin of Seat and Cupra. Although the production of Spanish electric vehicles is lagging behind the rest of Europe, it sees enormous potential in this region.
“(In Spain), we have all the factors you need to succeed: competitive and well-trained people and also an energy policy behind this,” he said. “There is no point in making zero emission cars if you use dirty energy.”
Despite these positive points, a long -standing weakness of the Spanish economy has been a chronically high unemployment rate, which is the largest in the EU and almost double the block average. However, the situation improved in the last quarter of 2024, when the unemployment rate without Spanish employment fell to 10.6%, its lowest level since 2008.
Meanwhile, the number of employment in Spain is now 22 million, a record. Work reform, encouraging stability of employment, is considered a key reason to this.
This reform has increased restrictions on the use of temporary contracts by companies, promoting greater flexibility in the use of permanent contracts. It has reduced the number of workers in temporary employment without hindering job creation.
In addition, although the arrival of immigrants has led to a fierce political debate, their absorption on the labor market is considered by many to be crucial for a country with a rapid aging population.
Socialist Prime Minister Pedro Sánchez struck frank to underline the need for immigrants, describing their contribution to the economy as “fundamental”.
The European Commission has planned that Spain will continue to achieve growth among the big economies of the block this year and will remain ahead of the EU average. However, challenges are looming on the horizon.
Getty images
Demonstrations against the number of tourists have taken place from the Canary Islands in Mallorca
The high dependence of tourism – and an increasing reaction against industry by the local population – is a concern.
Another is the vast public debt of Spain, which is greater than the country’s annual economic production.
María Jesús Valdemoros warns that it is “an imbalance that we must correct, not only because the new EU tax standards require it, but because it could cause financial instability”.
In addition, a housing crisis broke out across the country, leaving millions of Spaniards who find it difficult to find affordable housing.
With an uncertain and deeply polarized political landscape, it is difficult for the minority government of Sánchez to tackle these problems. But, as it tries to resolve these puzzles, Spain benefits from its status as an engine of European growth.
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