Spain: economy of the year?

I’m a big lover of Spain, having lived there on a few occasions and I’m obsessed with it as a country. Spain’s economy has demonstrated remarkable performance in 2024, earning recognition as “Economy of the Year” by The Economist, so I thought I'd have a look...

GDP Growth

Spain’s GDP grew by 3.3% year-on-year, driven by domestic consumption and exports. (source)

Spain’s economy grew by 0.8% quarter-on-quarter in Q2 2024, outperforming the euro area’s 0.2%, with revised GDP estimates show 5.7% growth from 2019 to Q2 2024. This strong performance continues despite German economic stagnation and high inflation and interest rates. (source)

Key drivers include a robust labour market, record-breaking international tourism, and steady private consumption, which now outpaces GDP growth. While investment grew quarter-on-quarter in Q2, it remains only 0.4% above Q4 2019 levels. Early Q3 data indicates continued, albeit slightly slower, growth. (source)

Private consumption and investment are expected to take the lead in driving growth, supported by improving household purchasing power, easing interest rates, and strong financial conditions. This marks a shift from the dominance of foreign demand and public consumption in recent years. (source)

Tourism Revenue

Tourism reached pre-pandemic levels, significantly contributing to economic growth. (source)

Tourist overnight stays in Spain hit historic highs this summer, surpassing 2019 levels by 3.2% in July and 1.3% in August, according to INE data. International tourism drove this growth, with a 4.8% year-on-year increase in foreign overnight stays, while domestic stays slightly declined by 1.2%. Despite slower growth compared to the year’s first half, with a 6.8% total rise, the reduced seasonality is redistributing tourist inflows year-round. This shift benefits the sector by lowering temporary employment rates and improving the use of tourism infrastructure. (Source)

Public Deficit

The public deficit decreased to 3% of GDP, a historic reduction of seven points since 2020. (source)

The government’s 2023–2026 Stability Programme aimed to gradually reduce Spain’s budget deficit, leveraging economic recovery to lower it from 4.8% of GDP in 2022 to 3.9% in 2023 and 2.5% by 2026 (source). So… Spain over performed!!

Employment Growth

Employment grew by 2.3%, supported by strong immigration flows. (source) and the unemployment rate decreased to 11.2%, the lowest in 16 years. (source).

Spain has remarkably reduced structural unemployment, with the rate falling by 1.7 percentage points between 2018 and 2022 to 11%, according to AMECO. This decline, among the fastest in the EU, highlights Spain’s strong post-pandemic employment recovery, alongside Portugal, Ireland, and Poland. (source)

Debt-to-GDP Ratio

The debt-to-GDP ratio declined gradually, reaching 102.3% in 2024. (source)

Spain’s economy has significantly improved its foreign imbalance, achieving 12 consecutive years of net lending capacity, with a record 3.7% of GDP in 2023. This was driven by current and capital balance surpluses, reflecting increased competitiveness and support from NGEU funds, highlighting structural resilience despite recent crises. (source)

Foreign Investment

There was an increase in foreign investments, particularly in renewable energy sectors. (source)

To give it context (source); Spanish foreign direct investment (FDI) has rebounded strongly, with inflows rising 58.5% year-on-year in 2022 to $34.8 billion, driven by U.S. (27.7%), U.K. (17.8%), and German (14%) investors.

In the first quarter of 2024, Spain attracted €6.14 billion in productive foreign investment, marking a 6.5% increase over the five-year average (source). The services and industrial sectors were the primary recipients, with notable growth in scientific and technical activities.

Two examples from this year are;

• Abu Dhabi’s Masdar agreed to acquire Spanish renewables group Saeta Yield for $1.4 billion, marking its second investment in Spain’s green energy sector in 2024. (source)

• Stellantis and CATL investing €4.1 billion in a Zaragoza EV battery factory, set to open by 2026, powering 700,000 vehicles daily. (source)

Housing Market

Housing prices increased, with rental prices rising by 10%, indicating a heated market. (source)

The market faces a shortage of new housing, with only about 90,000 homes completed annually between 2021 and 2023, while approximately 260,000 new households were formed each year during the same period. (source)

Nationwide house prices rose 8.72% in Q3 2024 (7.11% inflation-adjusted), following 8.16% growth in 2023. Official data showed 5.71% growth in Q2 2024, with inflation-adjusted increases moderating to 2.2% (source).