2015 Index of Economic Freedom

Spain

overall score67.6
world rank49
Rule of Law

Property Rights70.0

Freedom From Corruption59.0

Limited Government

Government Spending39.8

Fiscal Freedom53.1

Regulatory Efficiency

Business Freedom77.5

Labor Freedom52.6

Monetary Freedom81.3

Open Markets

Trade Freedom88.0

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 46.6 million
  • GDP (PPP):
    • $1.4 trillion
    • -1.2% growth
    • -1.4% 5-year compound annual growth
    • $29,851 per capita
  • Unemployment:
    • 26.7%
  • Inflation (CPI):
    • 1.5%
  • FDI Inflow:
    • $39.2 billion
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Spain’s economic freedom score is 67.6, making its economy the 49th freest in the 2015 Index. Its score has increased by 0.4 point since last year, reflecting improvements in six of the 10 economic freedoms, driven by investment freedom, monetary freedom, and the management of government spending, that outweigh declines in freedom from corruption and fiscal freedom. Spain is ranked 21st out of 43 countries in the Europe region, and its overall score is above the world average.

Over the past five years, a 2.6-point drop in economic freedom has pushed Spain’s economy into the “moderately free” category. Deteriorations in six of the 10 economic freedoms have been led by declines in the management of government spending and financial freedom.

Nevertheless, Spain’s most recent uptick in economic freedom reverses three straight years of declines. The rule of law is respected, and export growth is encouraged by an open trade and investment framework.

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Background

In 2008, Spain’s housing sector was highly leveraged, and the bursting of the housing bubble led in part to the recession beginning in 2009 and saddled banks with bad debt. Responses by the Spanish Socialist Workers Party, then in power, made the situation worse. Mariano Rajoy’s conservative Popular Party won the November 2011 election and introduced the largest budget deficit-reduction plan in Spain’s history, including crucial structural and labor reforms. In 2012, the EU bailed out Spain’s banking sector with a €41 billion loan. However, Rajoy’s government has dismissed recent warnings that more government austerity measures are needed and has demurred from tackling pension reform. Upcoming elections make further reforms unlikely until at least 2016. In the first quarter of 2014, Spain experienced its largest GDP increase since the 2008 recession. However, debt rose to over 90 percent of GDP in 2013. Spain’s unemployment rate has declined slightly to about 25 percent, and youth unemployment hovers around 55 percent.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 59.0 Create a Graph using this measurement

A wave of scandals exposed systematic corruption within the political class during the years of easy credit and economic boom and caused a severe erosion of institutional credibility. The judicial system is slow-moving and somewhat politicized, limiting redress for firms that have had contractual obligations breached. Protection of intellectual property meets or exceeds EU standards.

Limited GovernmentView Methodology

Spain’s top individual income tax rate is 52 percent, and its top corporate tax rate is 30 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 32.9 percent of gross domestic product. Government expenditures amount to 44.8 percent of domestic production, and public debt equals 94 percent of domestic output.

Regulatory EfficiencyView Methodology

Procedures for establishing a business have been streamlined, and licensing requirements have been reduced. Bankruptcy proceedings are fairly straightforward. Labor market reforms have made it less costly to dismiss a permanent worker. Spain subsidizes fuel for high-seas fishing fleets, but a 2013 clean energy bill cut renewable-energy subsidies and capped the earnings of existing renewable-power plants.

Open MarketsView Methodology

EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist, the EU is relatively open to external trade. Like other EU member states, Spain generally treats foreign and domestic investors equally. Banking has experienced deep restructuring and a notable turnaround. The number of cajas (savings banks) has declined after several rounds of consolidation.

Country's Score Over Time

Bar Graph of Spain Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Spain to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Switzerland80.5-1.1
2Estonia76.80.9
3Ireland76.60.4
4Denmark76.30.2
5United Kingdom75.80.9
6Lithuania74.71.7
7Germany73.80.4
8The Netherlands73.7-0.5
9Finland73.40.0
10Luxembourg73.2-1.0
11Georgia730.4
12Sweden72.7-0.4
13Czech Republic72.50.3
14Iceland72-0.4
15Norway71.80.9
16Austria71.2-1.2
17Latvia69.71.0
18Belgium68.8-1.1
19Poland68.61.6
20Cyprus67.90.3
21Spain67.60.4
22Slovakia67.20.8
23Armenia67.1-1.8
24Macedonia67.1-1.5
25Hungary 66.8-0.2
26Bulgaria66.81.1
27Romania66.61.1
28Malta66.50.1
29Albania65.7-1.2
30Portugal65.31.8
31Montenegro64.71.1
32Turkey63.2-1.7
33France62.5-1.0
34Italy61.70.8
35Croatia61.51.1
36Slovenia60.3-2.4
37Serbia 600.6
38Bosnia and Herzegovina590.6
39Moldova57.50.2
40Greece54-1.7
41Russia52.10.2
42Belarus49.8-0.3
43Ukraine46.9-2.4
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