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Economic and political overview

Economic Overview

Spain has been in the midst of a balanced economic recovery in recent years and is currently one of the fastest-growing economies in Europe. After growing by 2.7% in 2023, real GDP expanded by 3.2% in 2024, buoyed by carry-over effects from the previous year. Consumer spending continued to increase, supported by job creation and real income gains. On the external front, strong tourism and non-tourism service exports help net exports (data INE). As per the EU Commission, economic activity is projected to slow to 2.3% in 2025 and 2.1% in 2026, with domestic demand remaining the primary driver, fueled by consumption and increased investment. This is linked to the Recovery and Resilience Plan (RRP), solid corporate finances, and easing financing conditions. Furthermore, a rebound in imports should reduce the external demand contribution to GDP in 2025 and 2026.

After reaching 3.5% of GDP in 2023, the general government deficit decreased to an estimated 3% in 2024, as most measures to mitigate the economic and social impact of high energy prices were phased out (data EU Commission). The revenue-to-GDP ratio increased, partly due to the removal of VAT reductions, the special tax on electricity, and the exemption from the tax on the value of electricity. The phase-out of the fuel rebate also contributed to savings on the expenditure side. Risks to the projections stem from the costs associated with addressing the impact of recent floods in the Valencian Community. With unchanged policies, the government deficit is expected to further decline in 2025 to 2.6% of GDP, despite slightly higher interest expenditure. This decline is driven by slower growth in nationally-financed primary expenditure and positive tax revenue trends. Supported by strong nominal GDP growth, which outpaced the cost of debt servicing, the debt-to-GDP ratio decreased to 102.3% in 2024 (from 105.1% one year earlier). The ratio is expected to decrease more gradually in 2025-2026, reaching around 101.1%, due to a less favourable interest-growth rate differential (EU Commission). Annual HICP inflation declined to 2.8% in 2024, driven by the ongoing slowdown in energy and food price inflation. Underlying price pressures eased more gradually, particularly in services related to hospitality and transport. Headline inflation is expected to continue slowing in 2025, reaching 2.2%, with the downward trend in underlying components projected to persist in the coming quarters, before easing further to 2.0% in 2026.

The strong performance of the labour market continued into 2024, with job creation accelerating sharply in the first half of the year and maintaining momentum into the third quarter. Employment growth expanded by 2.3% in 2024, mainly driven by strong immigration flows. The unemployment rate is expected to decline steadily, reaching 10.7% by 2026, down from around 11.5% in 2024. Nominal wage growth outpaced inflation in 2024, with real income gains expected to moderate in 2025 and 2026. Spain remains a country with strong inequalities: according to the latest data by Eurostat, 27% of the population is at risk of poverty or social exclusion (the third-highest level in the EU), despite a relatively high GDP per capita (USD 35,789  in 2024 – IMF).

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 1,620.561,731.471,827.581,913.161,986.27
GDP (Constant Prices, Annual % Change) 2.72.92.31.81.6
GDP per Capita (USD) 33,89635,78937,36238,70739,792
General Government Balance (in % of GDP) -3.7-3.4-3.1-3.1-3.1
General Government Gross Debt (in % of GDP) 105.0102.3100.799.699.1
Inflation Rate (%) 3.42.81.92.02.0
Unemployment Rate (% of the Labour Force) 12.211.611.211.111.0
Current Account (billions USD) 43.0258.1858.7456.6655.57
Current Account (in % of GDP) 2.73.43.23.02.8

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Agriculture contributes around 2.5% of the Spanish GDP and employs 4% of the workforce (World Bank, latest data available). The country is home to almost one million agricultural and livestock businesses, covering 30 million hectares of land. Spain is the world's largest producer of olive oil and the world's third-largest producer of wine. The country is also one of the largest producers of oranges and strawberries in the world. The main crops are wheat, sugar beet, barley, tomatoes, olives, citrus fruits, grapes and cork. Livestock is also important, especially for pigs and cattle: Spain accounted for about one-quarter of the EU's pig (25.4%) and sheep (23.6%) populations in 2023 (EU Commission, latest data available). Data by the Agricultural Ministry shows that land destined for biological cultivation accounts for 12.5% of the total arable land, with 64.430 active operators in the sector (in production or distribution). Agricultural income in Spain reached EUR 37.759 billion in 2024, marking a 14.2% increase compared to 2023, according to the Ministry of Agriculture, Fisheries, and Food's initial economic estimates for the sector. This growth is largely attributed to lower production costs and a significant rise in agricultural production value, which hit a record high of EUR 68.430 billion. The increase in agricultural output, encompassing both crop and livestock production, was primarily driven by an 11% rise in production volumes, despite a 6% decline in prices due to falling overall inflation. The agricultural workforce grew by 1.5%, and income per Annual Work Unit (AWU) rose by 12.6%, reaching EUR 45,890.

The industrial sector accounts for one-fifth of GDP and employment. Manufacturing as a whole is the most important sector as it accounts alone for around 11% of GDP (World Bank). The industrial sector is dominated by automotive, textiles, industrial food processing, iron and steel, naval machines, and engineering. Spain is the second-largest automotive manufacturer in Europe, with exports accounting for over 60% of production. New sectors such as outsourcing of electronic components production, information technology, and telecommunications provide high growth potential. The renewable energy sector is also growing at a fast pace. According to the Instituto Nacional de Estadística (INE), industrial production recorded a 0.7% yearly increase in 2024, after a 1.6% one year earlier.

The tertiary sector contributes 68.7% of the GDP and employs 76% of the active population. The tourism sector is pivotal for the country’s economy, being Spain’s main source of income, as the country is the second-most popular tourist destination in the world. According to the latest official figures, tourism contributed 12.3% of GDP and employed 11.6% of the total number of national insurance contributors in 2023, generating a turnover of EUR 184 billion. The banking sector is also important and is composed of ten banking groups under the direct supervision of the Single Supervisory Mechanism (representing more than 90% of the industry). The Bank of Spain directly oversees the remaining 139 entities, including 47 less significant institutions and 92 subsidiaries or branches of foreign organizations (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 3.6 19.9 76.5
Value Added (in % of GDP) 2.5 20.1 68.7
Value Added (Annual % Change) 6.4 1.1 3.3

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.890.88

Source: World Bank - Latest available data.

 

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Foreign Trade

Spain is open to foreign trade, which represents 72% of its GDP (World Bank, latest data available). In 2023, the leading sectors in terms of share of total exports were capital goods (19.5%), food, beverages, and tobacco (17.5%), chemical products (16.8%), and the automotive industry (14.1%). Automotive sector exports saw the most significant growth, increasing by 20.6% year-on-year and reaching a value of EUR 53.9 billion. Conversely,  Spain's import sectors with the highest shares included capital goods (22.4% of the total, with industrial machinery accounting for 5.3%), chemical products (comprising 15.8%), energy products (15%),  food and beverages (12.4% - official government data).

In 2023, the European Union remained the primary destination for Spanish exports, accounting for 62.7% of the total (EUR 240.38 billion). However, sales to EU countries decreased by 1.6% compared to the previous year. Spain's top export markets within the Eurozone were France (15.6% of total exports), Germany (10.4%), Italy (8.6%), and Portugal (8.3%). The UK and the U.S. accounted for 5.9% and 4.9% of total exports, respectively. In the same period, the EU was the origin of 49.3% of Spain's imports, totalling EUR 209.3 billion—a 2.4% increase compared to the previous year. Germany reclaimed its position as Spain's top goods supplier (11.1% of total imports), overtaking China (10.4%). Other notable providers were France (9.3%), Italy (6.7%), the U.S. (6.7%), and the Netherlands (4.7% - official government data).

The country's trade balance for merchandise is structurally negative due to high imports of fuel and high added-value goods; although the trade in services is generally positive. According to the Spanish Tax Agency's Customs Department, merchandise exports in 2023 totalled EUR 383.69 billion, the second-highest on record, slightly below 2022 levels. Exports fell by 1.4% year-on-year nominally, following two years of nearly 20% growth after the pandemic. In real terms, exports dropped by 5.1% as export prices rose by 3.9%. Imports amounted to EUR 424.25 billion, down 7.2% nominally and 5.4% in real terms, with prices decreasing by 1.9%. According to data from the Bank of Spain, revised in April 2024, Spain's service income reached EUR 183.10 billion in 2023, a 15.9% increase year-on-year, while service payments totalled EUR 90.07 billion, growing by 9.2%. Due to higher income growth than payments, the service balance surplus surged to EUR 93.02 billion, up 23.2% from EUR 75.50 billion in 2022. This surplus fully offset the negative balances in goods and income. According to preliminary figures from the Ministry of Commerce, in the period Jan-Nov 2024, Spain exported EUR 354.72 billion worth of goods (stable compared to the previous year), whereas imports totalled EUR 390.88 billion (-0.3% y-o-y).

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 372,750326,192419,700494,259470,328
Exports of Goods (million USD) 334,018308,317379,969415,462423,221
Imports of Services (million USD) 86,02561,76176,86886,44297,414
Exports of Services (million USD) 156,82290,049118,546165,241198,126

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 66.459.466.578.672.2
Trade Balance (million USD) -28,203-7,919-24,761-63,203-37,500
Trade Balance (Including Service) (million USD) 41,81519,65014,53412,14963,702
Imports of Goods and Services (Annual % Change) 1.3-15.115.07.70.3
Exports of Goods and Services (Annual % Change) 2.3-20.113.414.32.8
Imports of Goods and Services (in % of GDP) 31.729.032.838.934.1
Exports of Goods and Services (in % of GDP) 34.730.533.839.838.1

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 3.72.83.03.23.2
Volume of imports of goods and services (Annual % change) 1.42.63.23.53.5

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Spain is a member of the following international economic organisations: IMF, European Union, ICC, Central American Integration System (SICA) (observer), WTO, Latin American Integration Association (LAIA) (observer), OECD, European Economic Area, among others. For the full list of economic and other international organisations in which participates Spain click here. International organisation membership of Spain is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Spain can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
France 15.0%
Germany 10.1%
Italy 8.3%
Portugal 8.0%
United Kingdom 5.8%
See More Countries 52.8%
Main Suppliers
(% of Imports)		 2023
Germany 10.6%
China 10.1%
France 8.8%
United States 6.5%
Italy 6.3%
See More Countries 57.7%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
King: Felipe VI (since 19 June 2014), hereditary
President of the Government and Prime Minister: Pedro Sanchez (since June 2018), Spanish Labour Socialist Party
Next Election Dates
Senate: July 2027
Congress of Deputies: July 2027
Current Political Context

Pedro Sánchez's third government was established in November 2023 after the Spanish Socialist Workers' Party (PSOE) and Sumar secured a parliamentary majority, with external support from the Republican Left of Catalonia (ERC), Together for Catalonia (Junts), EH Bildu, the Basque Nationalist Party (PNV), the Galician Nationalist Bloc (BNG), and the Canarian Coalition (CCa) following the 2023 general election. The right-wing opposition is formed by the People's Party (PP - centre-right), the far-right party Vox, the Navarrese People's Union (UPN), and the Canarian Coalition (Cca).
In 2024, Prime Minister Pedro Sánchez's minority government faced difficulties in passing key legislation, including the 2025 national budget. These challenges were the consequence of inconsistent support among coalition partners and regional parties, particularly Junts per Catalunya, which expressed dissatisfaction with the government's progress on Catalan autonomy issues. Moreover, allegations of corruption involving members of Sánchez’s family have further undermined the government’s stability.
In the 2024 European Parliament elections, the People's Party (PP) emerged as the largest one, securing 34.2% of the vote and 22 seats. The ruling PSOE received 30.2%, translating to 20 seats, while the far-right party Vox gained 6 seats with just under 10% of the vote. The left-wing coalition Sumar and Podemos saw weak results (3 and 2 seats, respectively), with additional competition from the newly formed right-wing party Se Acabó La Fiesta, which won 3 seats.
In foreign policy, Spain reaffirmed its commitment to NATO and the European Union, providing military and humanitarian aid to Ukraine and aligning with EU sanctions against Russia. Moreover, the Council of Ministers approved the recognition of the State of Palestine and Pedro Sánchez has joined the call for an arms embargo against Israel.
Main Political Parties
In the autonomous regions, several parties form coalition governments to garner more power. The December 2015 elections put an end to the two-party system. The main parties/alliances in the last elections held in 2023 were:

- Spanish Socialist Workers Party (PSOE): centre-left, a democratic socialist party and the oldest party
- People’s Party (PP): centre-right, sometimes referred to as the 'popular party'. It is the second largest political party in Spain
- Sumar: political alliance whose main policies include economic equality, social justice, and democratic reform. It was formed, among others, of: the left-wing anti-austerity Unite Movement (Unidas Podemos); United Left (IU) which included several regional parties; the Communist Party of Spain (PCE); and other regional parties.
- Vox: right-wing, Spanish Nationalist party
- Ciudadanos (Citizens' party - C’s): centrist to centre-right, liberalism.

Other significant political forces include:

- Republican Left of Catalonia (Esquerra Republicana de Catalunya - ERC): centre-left, catalan independentism
- JxCat - JUNTS: a coalition of two Catalan nationalist parties: Junts per Catalunya (JxCat) and Units per Avançar (UA).
- EH Bildu (EHB): left-wing, Basque independentism
- Canarian Coalition (CCa): a Canarian nationalist party
- The Party is Over (Se Acabó La Fiesta - SALF): right-wing to far-right and anti-establishment, founded by the social media personality Alvise Pérez. It has no representation in the parliament but obtained 3 seats in the 2024 European parliament elections.

Executive Power
The King is the Head of the State and the commander-in-chief of the army; his role is mostly ceremonial. Following legislative elections, the leader of the majority party or the majority of the coalition is appointed Prime Minister by the Sovereign then elected by the parliament for a 4-year tenure. The Prime Minister is the head of the government. He holds executive power which includes the execution of the law and the management of the routine affairs of the country. The Council of Ministers is appointed by the king on the recommendation of the Prime minister. There is also a Council of State which enjoys the role of the supreme consulting body of the government, but its recommendations are not binding.

The President of each Autonomous Community is from the majority party of the majority coalition winning elections of the Parliaments of the Regions which take place every 4 years. The President forms a government whose «ministers» are appointed under the title «consejeros» and seconded by a cabinet and director generals, etc. who are in charge of each Department heading the sectors for which the Autonomous Community has jurisdiction in substitution of the Spanish State (single administration).

Legislative Power
The legislative power is bicameral. The Parliament, called Cortes Generales, is made up of:
- The Senate which has 265 seats. Its role is that of representing the territories (Autonomous Communities and Departments). 208 senators are elected by proportional representation for 4 years. 57 senators are elected by parliaments of the 17 autonomous communities;
- The Congress of Deputies which has a minimum of 300 seats and a maximum of 400 (currently 350). The deputies are elected by universal suffrage for 4 years from departmental constituencies. There are allotted one minimum representation and the remaining is proportional to their population. To avoid splitting up which is harmful to the stability of the Chamber, the D’Hondt system is applied.
The executive wing of the government depends directly or indirectly on the parliament's support, often expressed by a vote of confidence. The legislative power belongs to the government and the two houses of parliament at the same time. The Prime Minister does not have the authority to dissolve the parliament directly, but he can recommend its dissolution to the king. The Spanish citizens enjoy considerable political rights.
The 17 Autonomous Communities also have a legislative power exercised by their unicameral Parliament within the limit of jurisdictions fixed by each of their statutes.
 

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