Why is Spain’s economy the best performing in Europe? All you need to know after the IMF boosted its 2024 growth forecast to 2.4%
A REPORT published by the International Monetary Fund in June revealed staggering recent growth of the Spanish economy, far outpacing that of the overall Eurozone.
The IMF recorded 2.5% GDP growth in 2023, and projected 2.4% growth in 2024 and 2.1% in 2025.
The figures mean the Spanish economy is predicted to outpace the overall Eurozone, which is expected to grow just 0.7% in 2025.
Meanwhile, growth of the Eurozone’s two largest economies — Germany and France — pales in comparison.
Germany saw just 0.1% economic growth in 2024, projected to increase to 1.0% by 2025, while France reached 0.7% in 2024, with 1.3% forecast for 2025.
According to a report by BBVA Research chief economist Miguel Cardoso, Spain’s impressive economic growth is due to a number of factors, namely a booming tourism industry, increased contributions to the economy from foreigners and immigrants, high labor participation rates, and strong performance from the service sector.
Income brought by tourism has shown upward trends, Cardoso notes, with foreign credit card data indicating a 5% increase in spending each quarter at the beginning of 2024 among non-residents.
At the same time, major service exports like information technology, financial services, communication, and consulting are trending upwards.
This growth could be related to the wider trend of increased spending on services among households in developed countries, with recent EU data showing huge jumps in spending on things like restaurants, hotels, recreation, and communication.
Growth in service exports are particularly significant in Spain, where the service sector represents some 70% of the national economy.
Consumption remains high as well, which Cardoso argues may be due to improvements in the labor market.
Though unemployment rates in Spain remain among the EU’s highest — registering 11.27% in July 2024 compared to Germany’s 3.3% and France’s 7.7% — the participation rate in the labor market has climbed steadily since the pandemic, sitting at 58.9%, or 21.68 million, according to the National Statistics Institute’s (INE) Active Population Survey.
Consequently, unemployment rates have decreased and are forecast to continue doing so, going from 12.2% in 2023 down to an anticipated 11.1% in 2025.
However, judging economic health solely by GDP growth may be misleading, according to a recent report by the Institute of Economic Studies — a private organisation that seeks to promote free enterprise through economic research and analysis.
The report reveals that GDP per-worker in Spain — a measurement which looks at worker productivity in relation to resources available — has fallen 1.9% since 2019, while this number in the overall European Union has grown by 1.3%.
The report also notes a loss in per capita income compared to the EU average.
In 2018 Spanish workers made 92.5% of the average EU income, while in 2023 they made 89.2%.
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