Economists have cast doubt on the longevity of Spain’s ‘miracle’ economy, which has won praise after bucking global trends for the past two years.
The country has the fastest-growing economy of any major country in the world, and is enjoying Europe’s highest rate of job creation.
Behind the boom are vital industries like tourism and renewable energies, but experts fear there are structural issues that threaten to derail its progress.
Speaking to the Financial Times, they said Spain still suffers from long-standing weaknesses, including heavy bureaucracy, an onerous tax system for the self-employed and lacklustre productivity levels.
These obstacles, they claimed, are the same ones Spain has faced for decades, and that they are merely hidden – for now – beneath the ‘high tide’ of services and tourism.
The country’s unemployment rate, for example, is at 10.5%, the highest in the EU, while its painful bureaucracy is still seen as a major blocker for business growth.
The report added that political gridlock is preventing meaningful reform.
Polarisation has become particularly severe, crowding out discussions about how to tackle major policy issues.
Miquel Roca, one of the two surviving drafters of Spain’s 1978 Constitution, told the newspaper he blames both the ruling PSOE and the Partido Popular opposition party for a lack of intellectual debate.
‘They feel very comfortable being enemies,’ he said. ‘When I have an enemy, I don’t need a discussion.’
Roca warned that legislation proposals are increasingly being viewed through a rigid ideological lens, making compromise and potential progress almost impossible – hence Sanchez has been unable to get a budget through parliament since 2022.
PP leader Alberto Feijoo seems hellbent on trashing any objective of Sanchez’s, without offering alternatives – while his own party sheds supporters to hard-right party Vox.
Despite this political stalemate, Spain’s economy grew 3.5% in 2024 and is on track for 2.9% growth this year, far outpacing other large EU countries.
Much of the growth has been driven by a significant rise in immigration, with newcomers filling labour-intensive, low-skilled roles. Renewables are also making headway, with rapid expansion of wind and solar capacity which has sharply reduced electricity costs and improved competitiveness.
Labour reform, meanwhile, has increased job security for temporary workers by giving them permanent contracts that have boosted household confidence and spending. Spain has also broadened its economy, exporting more professional and financial services, according to Goldman Sachs economist Filippo Taddei.
However, the experts warned that there are structural issues that remain largely unresolved.
Low productivity remains a sore spot, despite small improvements, as Spain still lags behind many EU peers, partly due to weak business investment.
In the realm of education, meanwhile, Spanish schools perform poorly by European standards, and universities often fail to equip graduates with skills demanded by employers, writes the FT.
Administrative hurdles also continue to make life difficult for entrepreneurs, despite partial reforms – with the life of an autonomo (self-employed) remaining infamously difficult.
And nationwide, housing remains the number one issue for Spaniards due to spiralling costs for both tenants and buyers.
Miriam Gonzalez Durantez, a commercial lawyer developing a political platform, told the FT that progress on housing is impossible while the right rejects any public-sector role and the left refuses to acknowledge the private sector as part of the solution.
‘Remove ideology from the equation,’ she urged.
Spain was also criticised for its lack of independent, well-funded policy institutes that could offer meaningful research and potential solutions.
Toni Roldan, a former MP for Ciudadanos, said Spanish politics once allowed for meaningful policy debate, citing past discussions on minimum income schemes and negative income taxes – however, he said those days are gone.
