The Spanish economy grew 3.2% in 2024: Why is it outperforming peers?
The Spanish economy grew 3.2% in 2024: Why is it outperforming peers? ·Euronews
Piero Cingari
5 min read
Powered by strong household spending, resilient investment and a tourism sector showing no signs of fatigue, Spain delivered one of the eurozone’s strongest growth performances in 2024, outshining larger economies and ushering in a new era of economic dynamism for Madrid.
Spain’s gross domestic product expanded by 0.8% on quarterly basis during the fourth quarter of 2024, according to the final reading released by the Spanish statistics agency INE on Wednesday.
For the full year, the Spanish economy grew by 3.2%, more than double the eurozone average of 0.9%.
Among eurozone countries, only Malta (6%), Croatia (3.8%) and Cyprus (3.4%) delivered stronger results. In sharp contrast, Germany’s economy contracted by 0.2%, while France and Italy managed tepid growth of 1.1% and 0.7%, respectively.
The outperformance of Spain is a consequence of both structural shifts and cyclical tailwinds.
Economists highlight the combination of resilient household spending, robust tourism activity, and effective deployment of European recovery funds as the core engines fuelling Madrid’s economic strength.
What’s driving Spain’s growth?
Domestic demand has been the main pillar of expansion.
In 2024, it added 3.6 percentage points to annual GDP growth, while external demand subtracted 0.2 points.
Household consumption increased by 1%, public expenditure by 0.3%, and investment by 2.9%. By contrast, net trade was a drag, as imports (+1.4%) outpaced sluggish exports (+0.1%).
Across sectors, all major industries—except primary activities—posted gains. Construction grew by 2.7%, services by 1.0%, and industry by 0.3%, driven by manufacturing’s 0.5% growth. Primary sectors declined by 0.7% after a temporary rebound in the previous quarter.
Tourism shows no signs of fatigue
Tourism, a cornerstone of the Spanish economy, remains a powerful growth engine.
According to Judit Montoriol Garriga, economist at CaixaBank Research, Spain welcomed an estimated 94 million international tourists in 2024—a 10% rise from the previous year.
“The sector has been showing no signs of cyclical exhaustion and it recorded strong growth in 2024,” Garriga said.
Tourism GDP is expected to rise by 3.6% in real terms in 2025, she said, lifting the sector’s share in the overall economy to 13.2%, from 12.9% in 2024.
The sector’s performance is particularly important given its wide spillover effects across retail, hospitality, and transport services.
Can Spain keep outperforming in 2025?
While a moderation in growth is anticipated, Spain is still expected to remain among the eurozone’s top performers in 2025.
The Organisation for Economic Co-operation and Development (OECD) projects a 2.6% GDP increase for Spain, up 0.3 percentage points from its December 2024 estimate.
By comparison, Germany, France and Italy are forecast to grow by 0.4%, 0.8%, and 0.7%, respectively. The broader eurozone is expected to expand by just 1%.
Montoriol Garriga at CaixaBank expects Spanish growth of 2.5% this year, driven largely by domestic demand, amid declining interest rates, rising household purchasing power, and continued deployment of EU recovery funds.
BBVA’s latest economic outlook reinforces this narrative, stating that “the stronger performance of peripheral economies—particularly Portugal and Spain—versus core eurozone countries will arguably be confirmed in 2025.”
BNP Paribas economist Lucie Barette said that “household consumption in Spain should remain the main driver of growth in the first quarter and during the year as a whole”.
She cited retail sales volumes rising by 2.2% year-on-year in January and new vehicle registrations up 8.2% over January and February.
Inflation, meanwhile, remains contained.
Harmonised consumer prices rose 2.9% year-on-year in February. Core inflation, which excludes volatile energy and food items, eased to 2.1%, inching closer to the European Central Bank’s 2% target. However, Barette noted the risk that rising producer prices may pass through to consumers in coming months.
Spain’s producer prices jumped 6.6% year-on-year in February 2025, the fastest pace since February 2023 and a sharp acceleration from the 2.6% increase recorded in January.
Recovery plan still fuelling growth
The continued deployment of NextGenerationEU (NGEU) funds under Spain’s Recovery, Transformation and Resilience Plan is another engine of growth.
As of end-2024, tenders and grants totalling €47.6 billion had been awarded—roughly 60% of the total grant envelope. Of this, €14.4bn was executed in 2024 alone.
Spain has already received €47.9bn in grants from the European Commission. A fifth disbursement request—comprising €8bn in grants and €15.9bn in loans—was submitted in December.
A Bank of Spain survey shows the importance of this stimulus: 45% of firms said they would not have made their investments without NGEU support, and 31% would have implemented only part of them.
Real estate and lending remain buoyant
Spain’s housing market showed signs of strength throughout 2024.
Home prices, based on appraisal values (MIVAU), rose by 5.8% last year and are expected to grow by 5.9% in 2025. Transaction prices (INE index) climbed by 8.4% in 2024 and are forecast to rise by 7.2% this year.
The lending cycle is also gaining momentum. January 2025 data shows new credit volumes accelerating, driven by increased economic activity and confidence in the recovery.
Labour market remains tight
The labour market continued to expand, with total hours worked rising 2.8% year-on-year in the fourth quarter and full-time equivalent employment up 2.3%.
Spain’s unemployment rate dropped to 10.61% in the fourth quarter of 2024, down from 11.21% in the previous quarter, reaching its lowest level since the second quarter of 2008.
The OECD said that unemployment remains low compared to pre-COVID levels in southern European countries, particularly in Spain and Italy.
Looking ahead: More gains, but slower pace
Although the Spanish economy is likely to decelerate from 2024’s exceptional pace, all indicators suggest it will remain one of the eurozone’s outperformers in the coming years. The OECD expects 2.1% growth in 2026—nearly double the rates expected in Germany, France and Italy.
With a resilient consumer, a booming tourism industry, and public investment still flowing from European funds, Spain’s post-pandemic recovery story appears far from over.
