Spain has emerged as one of Europe’s most dynamic economies, defying past struggles to become a leader in growth. In the aftermath of some of the region’s worst flooding in decades, Spain’s government announced a €10.6 billion emergency relief package to help recover from the damage, particularly in the Valencia region. Despite this setback, Spain’s economy continues to soar, bolstered by a booming tourism industry that has helped it achieve the second-fastest growth in the eurozone. Experts predict that Spain’s momentum will persist, with the IMF forecasting a growth rate of 2.9% for 2024, outpacing even large economies like the US.
Once a laggard during the eurozone crisis, Spain is now experiencing a remarkable economic turnaround. With tourism as a key driver, the country welcomed 21.8 million visitors last summer, spurring a surge in hotel bookings and contributing to a record-breaking recovery. The unemployment rate has also dropped significantly since the pandemic, now at its lowest since the financial crisis. Other contributing factors include a strong labour market, improved job creation, and increasing immigration, which has expanded the labour force and fueled higher consumption. This has resulted in lower borrowing costs for Spain, even surpassing France in terms of borrowing rates.
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The country’s recovery goes beyond tourism, with a growing services export sector that includes IT, banking, and engineering. Moreover, Spain has benefited from a rise in international students, many of whom are drawn by the lower cost of living in cities like Madrid compared to other European capitals. As a result, Spain has managed to reduce its debt-to-GDP ratio from 120.3% in 2020 to 107.7% last year, positioning itself as a key growth engine for the eurozone. Despite concerns about its ageing population and productivity levels, Spain’s economic performance remains an enviable example of resilience and success, particularly when compared to other Southern European nations.
