Spain flag Spain: Economic and Political Overview

The economic context of Spain

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Spain has been in the midst of a balanced economic recovery in recent years; however; the COVID-19 crisis led the country into an unprecedented downturn in economic activity in 2020, with the deepest contraction among EU member states. Nevertheless, despite the fact that containment measures still in force dragged down the economy in the first half of 2021, Spain’s GDP is estimated to have grown 5.7% over the year (IMF), with tourism-related activities supporting the recovery and private demand as the main growth driver. Spain is set to continue growing in 2022 (6.4%) and to return to its pre-pandemic level by the beginning of 2023. The EU Recovery and Resilience Plan (RRP) is expected to boost both public and private investment, as household consumption should remain strong over the forecast period.

Spain’s public finances deteriorated swiftly as a consequence of the COVID-19 pandemic and of the measures taken to contain its impact: in 2021, the general government deficit stood at 5.1% of GDP. As most measures will gradually phase out, from 2022 the deficit should start following a downward trend (4.4% of GDP this year and 4.3% in 2023). Conversely, after increasing by almost one-fourth in 2020 (to 119.9%), the debt-to-GDP ratio rose only marginally in 2021 (120.2%) and is expected to float around 116% over the forecast horizon, thanks to sustained economic growth and the containment of total current expenditure. Amid rising energy prices, headline inflation stood at 2.2% in 2021, despite some measures adopted by the government (including reduced VAT rates). The slack in the Spanish labour market should help to contain wages and inflationary pressures, thus inflation is expected to moderate to 1.6% this year and to slow further to 1.4% in 2023 (IMF forecast).

Existing short-time work schemes were reinforced to offset the COVID-19 crisis; however, the pandemic widened inequalities in the labour market, with disruptions among young, low-skilled, and temporary workers being particularly harsh. Nevertheless, both the number of workers and the unemployment rate have roughly recovered to their pre-pandemic levels. The latter stood at 15.4% in 2021 but is expected to decline to 13.9% in 2023. Spain remains a country with strong inequalities: according to the latest data by the Spanish Statistical Office, 26.4% of the population was at risk of poverty or social exclusion in 2020, up by more than 620,000 individuals in one year as a repercussion of the pandemic-induced crisis.

Main Indicators 202020212022 (e)2023 (e)2024 (e)
GDP (billions USD) 1.001.00e1.001.001.00
GDP (Constant Prices, Annual % Change) -10.85.1e4.31.22.6
GDP per Capita (USD) 2730292931
General Government Balance (in % of GDP) -5.4-4.3-4.5-4.2-4.3
General Government Gross Debt (in % of GDP) 120.0118.6113.6112.1110.1
Inflation Rate (%) -
Unemployment Rate (% of the Labour Force) 15.514.812.712.312.1
Current Account (billions USD) 10.5613.15-2.42-3.52-1.51
Current Account (in % of GDP) 0.80.9-0.2-0.2-0.1

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Agriculture contributes around 3.1% of 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.

The industrial sector accounts for 20.4% of GDP and employs one-fifth of the active population. Manufacturing is the most important industry as it accounts alone for around 11% of GDP (World Bank). The industrial sector is dominated by textiles, industrial food processing, iron and steel, naval machines, and engineering. 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 67.8% of 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 (although its contribution to GDP fell from a pre-COVID level of 12.4% in 2019, to only 5.5% in 2020 - INE), as the country is the second-most popular tourist destination in the world (83.7 million tourists in 2019, before the pandemic started). The banking sector is also important and is composed of twelve banking groups which include 51 private banks, 2 saving banks and 60 cooperative banks (Spanish Banking Association).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.0 20.4 75.5
Value Added (in % of GDP) 2.6 20.4 67.4
Value Added (Annual % Change) 2.1 4.0 6.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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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

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Latest Update: February 2023

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