Spain’s post-pandemic recovery has been nothing short of remarkable, positioning itself as a beacon of resilience within Southern Europe. Marc El-Lazidi, chief investment officer at Jesmond Mizzi Financial Advisors Ltd, here explores the economic and structural forces driving Spain’s standout performance and the challenges that lie ahead.
Q: Spain has been described as an economic outlier within Europe. What sets it apart from its neighbours?
A: Spain’s economy stands out for several reasons. While much of Europe has struggled to recover from the pandemic, Spain has surpassed pre-pandemic levels of growth, showing resilience across key sectors. One major driver is its economic diversification.
Beyond its booming tourism industry, Spain has invested heavily in renewable energy, infrastructure and textiles. Companies like Zara and Mango not only dominate the global fashion market but also reflect Spain’s ability to compete internationally.
Another critical factor is Spain’s financial sector, led by Banco Santander and BBVA, which has a strong presence in South America. This connection to fast-growing markets has provided an additional layer of stability and growth.
In contrast, other European countries, such as France and Germany, are grappling with political instability and deindustrialisation, which hinder their recovery efforts.
Q: The post-pandemic period has been challenging for most economies. How has Spain managed to thrive in this environment?
A: Spain’s success can be attributed to a mix of structural reforms, strategic investments and favourable demographic trends. The government’s early investment in infrastructure and renewable energy during the 2008 financial crisis laid the groundwork for today’s growth. These efforts positioned Spain as a leader in clean energy, with a robust pipeline of projects that continue to attract investment.
Moreover, Spain’s young, dynamic population − boosted by immigration from South America − has been a key factor. Unlike ageing economies such as Germany and Italy, Spain benefits from a labour force that is both growing and adaptable. This demographic advantage supports sectors like manufacturing and services, which have been critical to its recovery.
Q: How does Spain’s economic performance compare to other Southern European countries, like Italy and France?
A: Spain has consistently outperformed its Southern European peers.
One striking metric is its Purchasing Managers’ Index (PMI), which measures business activity. Spain’s PMI remains well above 50, indicating expansion, while Italy hovers near the 50 mark and France dips into contraction territory. This highlights Spain’s economic momentum compared to its struggling neighbours.
Debt-to-GDP ratios further illustrate the divide. While Spain’s debt levels remain high, they are more stable than those of France and Italy, which face downgrades and mounting fiscal pressures. Spain’s ability to manage its debt while maintaining growth has been a key differentiator in the region.
Spain’s economy has evolved far beyond its reliance on tourism
Q: Tourism has long been a cornerstone of Spain’s economy. Is it still the primary driver of growth?
A: Tourism remains a vital sector, contributing significantly to GDP and job creation. However, Spain’s economy has evolved far beyond its reliance on tourism. The renewable energy sector, for instance, has become a major growth area, attracting global investment. Spain’s commitment to clean energy began over a decade ago and today it stands as a European leader in this space.
Additionally, Spain’s textile industry − home to global giants like Zara and Mango − and its robust financial sector have diversified its economic base. These industries not only add to GDP but also enhance Spain’s reputation as a hub of innovation and competitiveness.
Q: What role does immigration play in Spain’s economic success?
A: Immigration has been a vital component of Spain’s growth story. Unlike many European countries facing challenges with ageing populations, Spain has successfully integrated immigrants, particularly from South America. These young, skilled workers contribute to labour market flexibility and economic productivity.
This demographic advantage contrasts sharply with countries like Germany and Italy, where ageing populations and restrictive immigration policies pose significant economic risks. By embracing immigration, Spain has not only bolstered its workforce but also ensured a steady stream of talent for its growing industries.
Q: Are there any risks or weaknesses that could derail Spain’s progress?
A: While Spain’s economic trajectory is largely positive, it is not without challenges.
Political stability remains a concern, particularly with the coalition government’s ability to push through necessary reforms. Historically, coalition governments in Europe have struggled to enact long-term policy changes, and Spain is no exception.
Another area of concern is the real estate market. After the devastating housing crash during the 2008 financial crisis, property prices have once again been on the rise. If unchecked, this could lead to another bubble, with potentially severe consequences for the broader economy.
Additionally, managing the ongoing immigration influx while ensuring social cohesion will require careful policymaking.
Q: Looking ahead, what can we expect from Spain in 2025 and beyond?
A: Spain’s future looks promising, but much will depend on its ability to maintain momentum and address structural challenges. Continued investment in renewable energy and infrastructure will be critical to sustaining growth.
Furthermore, the government’s success in managing coalition politics and implementing reforms will play a decisive role.
On the global stage, Spain’s diversified economy positions it as a resilient player. Its strong connections to South America and leadership in clean energy provide a competitive edge that few European countries can match.
While risks remain, Spain’s proactive approach to economic management suggests it is well-equipped to navigate the challenges ahead.
This interview does not intend to constitute an offer or agreement to buy or sell investments or give investment advice and the contents therein should not be construed as such. Investors should remember that past performance is no guide to future performance and that the value of investments may go down as well as up. The company is licensed to conduct investment services by the MFSA under the investment services act and is a member of the Malta Stock Exchange. The directors or related parties, including the company and their clients, are likely to have an interest in securities mentioned in this article. For more information, contact Jesmond Mizzi Financial Advisors Ltd of 67, Level 3, South Street, Valletta, on tel: 2122 4410, or e-mail info@jesmondmizzi.com.