The revival of the tourism industry has been a key driver of Spain’s economic growth, helping the eurozone’s fourth-largest economy outpace Germany, France, Italy, and the UK. Spain’s GDP expanded by 3.2% in 2024, while Germany’s economy shrank by 0.2%, and France, Italy, and the UK saw only modest growth.
Spain welcomed a record 94 million tourists in 2024, positioning itself as a top contender with France—which received 100 million visitors—to become the world’s most popular travel destination.
This strong economic performance earned Spain the title of the world’s best-performing economy.
On a chilly mid-winter afternoon in Segovia, central Spain, tourists gather beneath the city’s iconic Roman aqueduct, admiring its towering arches and capturing the moment with selfies.
While many visitors are Spanish, the crowd also includes travelers from across Europe, Asia, and Latin America, all drawn to Segovia’s rich history, renowned cuisine, and striking location just beyond the mountains north of Madrid.
Local tour guide Elena Mirón, wearing a bright fuchsia beret, prepares to lead a group through the city. Reflecting on the impact of the pandemic, she recalls a time when she feared tourism might never recover. “But now, things are going well, and I believe 2025 will be just as strong as the past two years. I’m grateful to make a living doing what I love,” she says.
“The Spanish model is successful because it is balanced, ensuring sustainable growth,” explains Carlos Cuerpo, Spain’s business minister. He highlights that Spain contributed 40% of the eurozone’s total economic growth last year.
While tourism remains a crucial sector, Cuerpo also credits financial services, technology, and investment as key factors in Spain’s post-pandemic recovery. Despite a severe downturn in 2020, when GDP contracted by 11%, the country has rebounded without lasting economic scars, he says.
Spain’s recovery has been supported by EU funding from the Next Generation program, which will provide up to €163 billion by 2026. These funds are being invested in infrastructure, including the national rail network, green energy initiatives, and support for small businesses and the electric vehicle industry.
“Public spending has played a significant role, contributing to around half of our economic growth since the pandemic,” says María Jesús Valdemoros, an economics lecturer at IESE Business School.
In contrast, other major European economies have struggled due to their heavy dependence on industry, which faces challenges such as high energy costs, competition from Asia, environmental transition expenses, and trade protectionism.
Spain has also grappled with inflation and the cost-of-living crisis, exacerbated by supply-chain disruptions and the war in Ukraine. Inflation peaked at 11% in mid-2022, but by the end of 2024, it had dropped to 2.8%. Government measures, including fuel subsidies and minimum wage hikes, helped ease the financial burden on households.
During the energy crisis, Spain and Portugal secured an agreement with the EU—known as the “Iberian exception”—to cap gas prices for electricity generation, lowering consumer energy bills.
Cuerpo believes these policies have bolstered Spain’s resilience against economic shocks, including inflation caused by the Ukraine war. “We’ve built a protective shield for both consumers and businesses,” he says.
Spain’s push for renewable energy has further strengthened its economy, making it the EU’s second-largest producer of green energy. This advantage is particularly important for the country’s auto industry—Europe’s second-largest—which aims to expand its electric vehicle production.
Wayne Griffiths, CEO of Seat and Cupra, sees great potential in Spain’s green energy policies. “We have everything needed to succeed—skilled workers, a competitive edge, and an energy strategy that supports sustainability,” he says.
However, Spain continues to struggle with a persistently high unemployment rate, the highest in the EU. Yet, there are signs of improvement—by late 2024, unemployment had fallen to 10.6%, the lowest since 2008, while employment reached a record 22 million people.
A major labor reform aimed at reducing reliance on temporary contracts has contributed to job stability without slowing job creation.
Immigration, though politically controversial, has played a crucial role in addressing labor shortages in an aging population. Prime Minister Pedro Sánchez has emphasized the economic necessity of immigrants, calling their contributions “fundamental.”
Looking ahead, Spain is expected to continue leading economic growth among major EU nations, but challenges remain.
Overreliance on tourism—and growing resistance from locals frustrated by overtourism—is a concern. Additionally, Spain’s public debt exceeds its annual economic output, posing a risk to long-term stability.
Valdemoros warns that addressing this imbalance is critical, not only to comply with new EU fiscal regulations but also to prevent financial instability.
Meanwhile, a worsening housing crisis is making affordable accommodation increasingly scarce, adding to the government’s challenges.
With a politically polarized landscape and a minority government, tackling these issues won’t be easy. However, for now, Spain continues to thrive as the driving force behind Europe’s economic growth.
