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Economic and political overview

Economic Overview

service exports help net exports (data INE). As per the EU Commission, economic activity is projected to slow to 2.4% in 2026 and 1.9% in 2027, 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 2026 and 2027.

After reaching 3.0% of GDP in 2024, the general government deficit decreased to an estimated 2.4% in 2025, 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 hold at 2.4% of GDP in 2026, 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 100.7% in 2025 (from 102.3% one year earlier). The ratio is expected to decrease more gradually in 2026-2027, reaching around 98.9%, due to a less favourable interest-growth rate differential (EU Commission). Annual HICP inflation declined to 2.7% in 2025, 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 pick up in 2026, reaching 3.0%, with energy prices reversing the earlier downward trend in the coming quarters, before easing to 2.5% in 2027.

The strong performance of the labour market continued into 2025, with job creation accelerating sharply in the first half of the year and maintaining momentum into the third quarter. Employment growth remained robust in 2025, mainly driven by strong immigration flows. The unemployment rate is expected to decline steadily, reaching 9.9% by 2026 and 9.6% by 2027, down from 10.5% in 2025. Nominal wage growth outpaced inflation in 2025, with real income gains expected to moderate in 2026 and 2027. Spain remains a country with strong inequalities: according to the latest data by Eurostat, 26.4% of the population is at risk of poverty or social exclusion (the fourth-highest level in the EU), despite a relatively high GDP per capita (USD 38,627  in 2025 – World Bank).

 
Main Indicators 20252026 (E)2027 (E)2028 (E)2029 (E)
GDP (billions USD) 1,903.832,091.222,186.522,284.752,375.60
GDP (Constant Prices, Annual % Change) 2.82.11.81.81.7
GDP per Capita (USD) 38,29041,56343,00844,54245,968
General Government Balance (in % of GDP) -2.5-2.1-2.3-2.2-2.2
General Government Gross Debt (in % of GDP) 100.498.296.294.292.9
Inflation Rate (%) 2.73.02.32.52.0
Unemployment Rate (% of the Labour Force) 10.59.89.89.99.9
Current Account (billions USD) 55.0446.2342.6038.4935.69
Current Account (in % of GDP) 2.92.21.91.71.5

Source: IMF – World Economic Outlook Database , Latest data available

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

oys 76.8% 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) 3.37 19.85 76.77
Value Added (in % of GDP) 2.68 19.58 68.36
Value Added (Annual % Change) 1.18 3.26 3.19

Source: World Bank - Latest available data.

 
Monetary Indicators 20212022202320242025
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.850.950.920.920.88

Source: World Bank - Latest available data.

 

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Foreign Trade

Spain is open to foreign trade, which represents 69% of its GDP in 2025 (World Bank). In 2025, the leading sectors in terms of share of total exports were capital goods (19.4%), food, beverages, and tobacco (19.3%), chemical products (17.1%), and the automotive industry (12.8%). Automotive sector exports declined, falling by 7.1% year-on-year to a value of EUR 49.4 billion. Conversely,  Spain's import sectors with the highest shares included capital goods (23.7% of the total, with industrial machinery accounting for 5.6%), chemical products (comprising 16.2%), food and beverages (13.0%),  energy products (12.1% - official government data).

In 2025, France remained the main destination for Spanish exports (14.1% of the total), followed by Germany (10.0%), Portugal (8.7%), Italy (8.0%), the United Kingdom (6.4%), and the U.S. (4.2%). On the import side, China (11.1% of total imports) narrowly overtook Germany (11.0%) as Spain's top supplier, ahead of France (8.3%), Italy (6.9%), the U.S. (6.7%), and the Netherlands (4.7% - data Comtrade).

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 Ministry of Economy, Trade and Enterprise, merchandise exports in 2025 totalled EUR 387.09 billion, the second-highest on record, slightly below 2022 levels. Exports rose by 0.7% year-on-year nominally. Imports amounted to EUR 444.15 billion, up 4.6% nominally, leaving a trade deficit of EUR 57.05 billion. Tourism receipts, the backbone of the services surplus, reached EUR 105.2 billion in 2025 (6.2% of GDP), up from EUR 98.4 billion in 2024 (Bank of Spain). According to preliminary figures from the Ministry of Economy, Trade and Enterprise, in the period Jan-Jun 2026, Spain exported EUR 201.13 billion worth of goods (+2% compared to the previous year), whereas imports totalled EUR 233.92 billion (+5.2% y-o-y).

 
Foreign Trade Values 20212022202320242025
Imports of Goods (million USD) 419,700494,259469,877479,331513,316
Exports of Goods (million USD) 379,969415,462422,487428,505445,106
Imports of Services (million USD) 77,71788,71594,561111,381126,364
Exports of Services (million USD) 117,373164,839194,576219,841254,593

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

Foreign Trade Indicators 20212022202320242025
Foreign Trade (in % of GDP) 66.578.571.870.069.5
Trade Balance (million USD) -24,761-63,339-37,949-36,644-55,373
Trade Balance (Including Service) (million USD) 14,53412,10862,20671,91873,357
Imports of Goods and Services (Annual % Change) 15.07.7-0.02.96.2
Exports of Goods and Services (Annual % Change) 13.414.22.23.23.6
Imports of Goods and Services (in % of GDP) 32.838.834.032.932.8
Exports of Goods and Services (in % of GDP) 33.839.737.837.136.6

Source: World Bank ; Latest available data

Foreign Trade Forecasts 2026 (e)2027 (e)2028 (e)2029 (e)2030 (e)
Volume of exports of goods and services (Annual % change) 1.92.52.72.52.5
Volume of imports of goods and services (Annual % change) 4.32.82.72.52.3

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)		 2025
France 14.1%
Germany 10.0%
Portugal 8.7%
Italy 8.0%
United Kingdom 6.4%
See More Countries 52.8%
Main Suppliers
(% of Imports)		 2025
China 11.1%
Germany 11.0%
France 8.3%
Italy 6.9%
United States 6.7%
See More Countries 56.1%

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
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

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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