Economic and Political Overview

flag Spain Spain: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response


Economic Outline

Economic Overview

Spain has been in the midst of a balanced economic recovery in recent years; although the COVID-19 crisis led the country into an unprecedented downturn in economic activity, with the deepest contraction among EU member states. Nevertheless, the Spanish economy recovered well from the crisis, growing by 5.8% in 2022 and an estimated 2.5% in 2023, driven by external and domestic demand, benefiting also from a strong carry-over from 2022 and a marked improvement in the terms of trade. Domestic demand, driven by increased real income for households and ongoing relief from price pressures, should be the key growth driver this year. The extended implementation of the Recovery and Resilience Plan, coupled with a faster disbursement to ultimate recipients, is projected to bolster investment, particularly in machinery and equipment. Consequently, GDP is predicted to grow by 1.7% in 2024 (still above eurozone average), with a slight acceleration to 2% in 2025 according to the EU Commission, as the recently approved RRF loan component adds further impetus to growth-oriented expenditures.

In 2023, the anticipated decline in the general government deficit was projected to be more gradual compared to the preceding years. Despite robust personal income tax revenues, overall tax revenues are exhibiting signs of moderation after a period of buoyant growth, primarily due to lower-than-expected growth in indirect tax revenues, influenced by the slowdown in the inflation of imported goods. On the expenditure side, the increase in current expenditure was propelled by rising pension costs linked to inflation indexation and growing intermediate consumption. Additionally, the government approved two additional packages of measures, costing an estimated EUR 2.7 billion (0.2% of GDP), aimed at alleviating the impact of high energy prices. These measures included an extension of the VAT reduction for basic food items and direct support for the road and maritime transport sectors. Overall, the budget deficit was estimated at 3.9% of GDP last year, with a further reduction expected in 2024 (2.9%) due to savings from the phasing out of energy-related measures. The trajectory for the debt-to-GDP ratio in 2023 indicated a decline, reaching 107.3% (from 111.6% one year earlier), which should continue over the forecast horizon. This stabilization is attributed to the diminishing favorable gap between nominal GDP growth and the cost of servicing debt. In 2023, HICP inflation saw a reduction to 3.6%, primarily influenced by the ongoing moderation of the energy component. For 2024, there is an anticipated further slowdown in HICP inflation to 3.4%, even with the upward pressure resulting from the expected phasing out of government measures implemented in preceding years to counter the impact of high energy prices. As we move into 2025, HICP inflation is forecasted to average 2.1% (data EU Commission).

The labor market was resilient in 2023, supported by sustained job creation and a decrease in the proportion of temporary employees in the private sector, despite a slowdown in employment growth observed since the summer. The unemployment rate was estimated at 11.8% in 2023 and is expected to continue improving in the forecast period, reaching 11.3% and 11.1% in 2024 and 2025, respectively (IMF). Wages are anticipated to experience a moderate increase, aligning with the thresholds outlined in the multi-year agreement signed last May, with no significant impact on cost-competitiveness. Spain remains a country with strong inequalities: according to the latest data by Eurostat, 26% 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 50,472 in 2023 – IMF).

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 1,418.921,581.151,647.111,715.581,772.09
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 29,80033,07134,04535,07235,852
General Government Balance (in % of GDP) -4.5-3.7-3.2-3.2-3.3
General Government Gross Debt (in % of GDP) 111.6107.5106.3104.9105.0
Inflation Rate (%)
Unemployment Rate (% of the Labour Force) 12.912.111.611.311.0
Current Account (billions USD) 8.6841.1141.7040.3834.40
Current Account (in % of GDP)

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

Note : (E) Estimated data


Main Sectors of Industry

Agriculture contributes around 2.3% 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 (24.5%) populations in 2022 (EU Commission). Data by the Agricultural Ministry shows that land destined for biological cultivation accounts for 10.79% of the total arable land, with 58.485 active operators in the sector (in production or distribution). Spain's agricultural and food industry has faced challenges attributed to drought and the repercussions of a substantial increase in production costs during 2021-2022, initially stemming from the pandemic and subsequently exacerbated by the conflict in Ukraine. These dual factors had a notable impact on the gross value added (GVA) of the primary sector in 2022, witnessing a decline of 19.8% in real terms (–5.7% in nominal terms). However, there was a modest improvement in GVA during the first half of 2023, with a year-on-year decrease of –4.7%, partly due to the stabilization of production costs.

The industrial sector accounts for 20.8% of GDP and employs one-fifth of the active population. 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.

The tertiary sector contributes 67.9% 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 contributes 11.7% of GDP and employs 12.2% of the total number of national insurance contributors in Spain. During 2022, Spain welcomed 71.6 million international visitors, marking a substantial annual growth of 129.5%. However, this figure remains below the pre-pandemic level of 83.7 million recorded in 2019. 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) and 48 private banks, 2 saving banks and 61 cooperative banks supervised by Banco de España (European Banking Federation).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.1 20.2 75.8
Value Added (in % of GDP) 2.4 20.8 67.7
Value Added (Annual % Change) -1.1 3.3 6.5

Source: World Bank, Latest data available.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

See the country risk analysis provided by Coface.


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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

After the Spanish general election on July 23, 2023, attempts to form a government were made, but none of the political parties secured an overall majority, thus the incumbent cabinet led by Pedro Sánchez remained in a caretaker role until the establishment of a new government. Despite the absence of a majority for both left-wing (formed by the Spanish Socialist Workers' Party (PSOE) and Sumar, with the support of the Republican Left of Catalonia (ERC), EH Bildu, the Basque Nationalist Party (PNV), and the Galician Nationalist Bloc (BNG) and right-wing blocs (comprising the People's Party (PP), Vox, the Navarrese People's Union (UPN), and Canarian Coalition (CCa), political tensions persisted for weeks. In a pivotal move, Sánchez endorsed an amnesty law for Catalan separatist politicians linked to the 2017–2018 Spanish constitutional crisis and the 2019–2020 Catalan protests. Eventually, on November 16, 2023, he successfully garnered support from Sumar, ERC, Junts, EH Bildu, PNV, BNG, and CCa, securing his re-election as prime minister with an absolute majority.
Spain's new government policies should align with established medium-term commitments outlined in the country’s national Recovery Plan and the latest Fiscal Stability Programme (2023-2026). Nevertheless, potential challenges may arise due to the escalating polarization in the political landscape and Sanchez's dependence on support from separatist parties to navigate future legislative measures through parliament.

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 July 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.

Type of State
Spain is a constitutional monarchy based on a parliamentary democracy.
Power is highly decentralized; the autonomous communities have a high level of legislative, executive and fiscal autonomy.
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 is also called 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.

Indicator of Freedom of the Press


The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:

Indicator of Political Freedom


The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Political Freedom:
Civil Liberties:

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House


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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) in Spain, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.


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Latest Update: July 2024