Spain is making headlines across Europe for all the right reasons: a surging economy, a series of credit rating upgrades from major agencies, and growth numbers that leave much of the continent in the dust. But beneath the surface of this success story lies a complex web of demographic change, political challenges, and questions about how long the good times can last.
According to a recent editorial in Financial Times, Spain stands out as an "unusual case among European economies," boasting a growth rate of around 2.6%—more than double the eurozone average of just over 1%. The British newspaper points out that this robust performance is underpinned by several key factors: a tourism sector that has bounced back strongly from the pandemic, government subsidies funneled into infrastructure projects, a surge in cheap renewable energy that has drawn foreign investment, and previous reforms aimed at boosting job stability.
But perhaps the most striking ingredient in Spain's economic recipe is immigration. Since 2022, the country has welcomed an annual net influx of about 600,000 immigrants, most of working age. This wave of newcomers has pushed employment to record highs and fueled a boom in consumption. As Financial Times notes, "while other European countries have determined to reinforce their borders, Spain has adopted a more liberal approach." The data backs this up: in 2023, migrants from Latin America accounted for roughly 70% of the increase in Spain's population, according to JP Morgan. The shared language, cultural similarities, and existing networks have made it easier for these migrants to integrate into the labor market and Spanish society at large.
The government has recently simplified legal immigration routes and plans to grant residence and work permits to more undocumented migrants. This approach stands in stark contrast to the tightening of borders seen elsewhere in Europe. Yet, as Financial Times warns, "despite all its success to date, the boom in growth driven by immigration must be handled carefully." While Spain's real GDP in purchasing power parity has jumped 6.8% since 2019, GDP per capita has risen just 3.1%. The majority of immigrants have filled jobs in lower value-added sectors such as hospitality and construction, plugging labor shortages but not necessarily boosting productivity or wages for everyone.
International organizations have taken notice of Spain’s economic momentum. On September 26, 2025, both Moody’s and Fitch upgraded Spain’s sovereign credit rating, following a similar move by S&P Global earlier in the month. Moody’s bumped Spain up from 'Baa1' to 'A3' with a stable outlook, citing "economic strength improving due to more balanced growth, labor market recovery, and the strengthening of the banking sector, which increase the economy’s resilience." Fitch echoed this sentiment, moving Spain from 'A-' to 'A' and highlighting "recent productivity gains, moderate wage growth and relatively low energy prices" as factors that have "boosted external competitiveness and strengthened private external balance sheets." S&P, for its part, pointed to a "notable improvement" in Spain's balance sheet and an enhanced ability to weather economic shocks.
Spain’s government and central bank have responded to this vote of confidence by revising their own growth forecasts upward. They now expect the country’s GDP to expand by 2.7% in 2025, up from an earlier estimate of 2.6%—and far ahead of the 1.2% growth projected for the broader euro area. National and international bodies have echoed these optimistic projections, placing Spain firmly at the top of the European growth league.
Judith Arnal, senior fellow at the Elcano Royal Institute in Madrid, told CNBC that Spain has "emerged as the clear growth leader among the euro area's largest economies in recent years." She emphasized that the country’s growth is not just about tourism anymore. "Spain's growth has relied not only on booming tourism but also on dynamic non-tourism services, such as business, telecoms and IT services. This marks a shift in the country's growth pattern, showing that Spain has competitive firms able to export beyond traditional sectors."
Yet, Arnal also highlighted the flip side of this demographic-driven expansion: "More than half of the jobs created since 2020 have been taken up by immigrants, which has supported overall GDP expansion but meant that GDP per capita has advanced less strongly. This reflects a more extensive than intensive growth model." In other words, Spain is growing by adding more workers rather than by making each worker significantly more productive.
It’s not all smooth sailing. Spain’s unemployment rate remains the highest in the European Union, despite the recent surge in job creation. The Financial Times editorial cautions that to genuinely improve living standards, Spain must address its slow productivity growth. The International Monetary Fund (IMF) has recommended simplifying regulations and offering tax incentives to encourage long-term risk capital, particularly for small businesses. Training initiatives and efforts to attract more foreign direct investment in high-end service sectors—such as finance, IT consulting, and engineering—are also seen as crucial to sustaining and spreading the benefits of growth.
There are also social and political hurdles to navigate. While most Spaniards currently support immigration, Financial Times warns that "if the government does not provide adequate support for access to affordable housing and public services, the opening to foreigners could be reduced." Rent prices are already unaffordable for many, and there have been episodes of tension between local residents and people of North African origin. The editorial places particular emphasis on Spain’s "fragmented political environment," which it sees as a major obstacle to consolidating economic progress. The minority government of President Pedro Sánchez, already affected by scandal, has struggled to pass important legislation. "It is a penalty. Spain has demonstrated to other advanced economies how immigration can be an important source of economic resilience, even in a period of national and international instability. To continue being an example, Spain needs to convert its demographic bonanza into lasting prosperity," the editorial concludes.
Looking ahead, analysts agree that political stability and structural reforms will be key. Arnal told CNBC, "The government of Spain is keen to showcase this period of high growth, but fiscal consolidation and structural reforms will be the true test over the medium term." The recent rating upgrades and economic momentum have given Spain a unique opportunity to lead by example in Europe, but the path forward will require careful management of its demographic shifts, labor market, and political divisions.
Spain’s economic story is one of resilience and reinvention, but whether it can turn today’s growth into tomorrow’s prosperity will depend on choices made in the coming years—by policymakers, businesses, and citizens alike.
