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It’s a chilly mid-winter afternoon in Segovia, in central Spain, and tourists are gathered at the foot of the city’s Roman aqueduct, gazing up at its famous arches and taking selfies. Many of the visitors are Spanish, but there are also people from other European countries, Asians and Latin Americans, all drawn by Segovia’s historic charm, gastronomy and dramatic location just beyond the mountains north of Madrid.
“There was a moment during Covid when I thought ‘maybe tourism will never, ever be like it was before’,” says Elena Mirón, a local guide dressed in a fuchsia-coloured beret who is about to lead a group across the city.
“Spain received a record 94 million visitors in 2024 and is now vying with France, which saw 100 million, to be the world’s biggest foreign tourist hub.
And the tourism industry’s post-Covid expansion is a major reason why the eurozone’s fourth-biggest economy has been easily outgrowing the likes of Germany, France, Italy and the United Kingdom, posting an increase in GDP of 3.2% last year.
By contrast, the German economy contracted by 0.2% in 2024, while France grew by 1.1%, Italy by 0.3%, and the United Kingdom by 0.4%.
The country’s green energy output is seen as another favourable factor, not just in guaranteeing electricity, but also spurring investment. Spain has the second-largest renewable energy infrastructure in the EU.
The latter is a boon for a country that is Europe’s second-biggest car producer, according to Wayne Griffiths, the British-born CEO of Seat and Cupra. Although Spanish electric vehicle production is lagging behind the rest of Europe, he sees enormous potential in that area.
Despite these positives, a longstanding weakness of Spain’s economy has been a chronically high jobless rate, which is the biggest in the EU and almost double the block’s average. However, the situation did improve in the last quarter of 2024, when the Spanish jobless unemployment rate declined to 10.6%, its lowest level since 2008.
The number of people in employment in Spain now stands at 22 million, a record high. A labour reform, encouraging job stability, is seen as a key reason for this.
This reform increased restrictions on the use of temporary contracts by companies, favouring greater flexibility in the use of permanent contracts. It has reduced the number of workers in temporary employment without hindering job creation.
Also, although the arrival of immigrants has driven a fierce political debate, their absorption into the labour market is seen by many as crucial for a country with a rapidly ageing population.
The European Commission has forecast that Spain will continue to lead growth among the bloc’s big economies this year and remain ahead of the EU average. However, challenges are looming on the horizon.
The heavy reliance on tourism – and a growing backlash against the industry by local people – is one concern. Another is Spain’s vast public debt, which is higher than the country’s annual economic output.
María Jesús Valdemoros warns that this is “an imbalance that we need to correct, not just because the EU’s new fiscal norms demand it, but because it could cause financial instability”.
In addition, a housing crisis has erupted across the country, leaving millions of Spaniards struggling to find affordable accommodation.
With an uncertain and deeply polarised political landscape, it is difficult for Sánchez’s minority government to tackle such problems. But, while it attempts to resolve these conundrums, Spain is enjoying its status as the motor of European growth.
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