2018 Index of Economic Freedom

Spain

overall score65.1
world rank60
Rule of Law

Property Rights73.1

Government Integrity51.5

Judicial Effectiveness62.0

Government Size

Government Spending42.8

Tax Burden62.0

Fiscal Health36.1

Regulatory Efficiency

Business Freedom66.3

Labor Freedom59.0

Monetary Freedom86.7

Open Markets

Trade Freedom86.9

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 46.3 million
  • GDP (PPP):
    • $1.7 trillion
    • 3.2% growth
    • 0.6% 5-year compound annual growth
    • $36,416 per capita
  • Unemployment:
    • 19.4%
  • Inflation (CPI):
    • -0.2%
  • FDI Inflow:
    • $18.7 billion
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Spain’s economic freedom score is 65.1, making its economy the 60th freest in the 2018 Index. Its overall score has increased by 1.5 points, with improvements in fiscal health, judicial effectiveness, and labor freedom outpacing lower scores for the government integrity and business freedom indicators. Spain is ranked 30th among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.

The severe 2017 constitutional crisis triggered by Catalonia’s push for separation will test the strength of Spain’s post–financial crisis economy, the rebound of which was facilitated by structural reforms highlighted by a reduction of the inefficient and oversized government sector, labor market reforms, and restoration of the financial sector’s competitiveness. Resolution of the crisis could threaten fiscal stability. Despite relatively sound economic institutions and transparent regulatory and judicial systems, the indebted public sector is still a drag on growth.

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Background

Since returning to democracy in 1975, Spain has become the eurozone’s fourth-largest economy. Prime Minister Mariano Rajoy’s conservative Popular Party won a decisive parliamentary plurality in June 2016, but Rajoy was not able to form a minority government to begin his second term in office until October. He survived a vote of no confidence in June 2017. Leading sectors of Spain’s diversified economy include manufacturing, financial services, pharmaceuticals, textiles and apparel, footwear, chemicals, and a booming tourism industry. Unemployment has decreased but remains a major problem, especially for young job seekers. The government in Madrid removed the rogue regional government of Catalonia from office after declaring that an October 2017 independence referendum vote was illegal.

Rule of LawView Methodology

Property Rights 73.1 Create a Graph using this measurement

Government Integrity 51.5 Create a Graph using this measurement

Judicial Effectiveness 62.0 Create a Graph using this measurement

Although enforcement of contracts is slow, Spanish law protects property rights effectively. The courts have a solid record of investigating and prosecuting corruption cases, but the high workload means that courts are often overburdened, and cases proceed very slowly. Spain’s score in Transparency International’s Corruption Perceptions Index has dropped steeply in recent years. Enforcement of anticorruption statutes is weak.

Government SizeView Methodology

The top individual income tax rate has been cut to 45 percent. The top corporate tax rate has been cut to 25 percent. Other taxes include a value-added tax. The overall tax burden equals 33.8 percent of total domestic income. Over the past three years, government spending has amounted to 43.7 percent of total output (GDP), and budget deficits have averaged 5.3 percent of GDP. Public debt is equivalent to 99.3 percent of GDP.

Regulatory EfficiencyView Methodology

Efforts to improve the entrepreneurial environment have stagnated in recent years as attention has focused on fiscal stability. Labor costs have moderated to some extent but are still high. Price controls have all but disappeared in Spain except in a few sectors, such as farm insurance, stamps, public transport, and medicines.

Open MarketsView Methodology

Trade is significant for Spain’s economy; the combined value of exports and imports equals 63 percent of GDP. The average applied tariff rate is 1.6 percent. Nontariff barriers impede some trade. In general, government policies do not significantly deter foreign investment. The financial sector has largely recovered from the banking crisis. Reforms have included the establishment of a new framework for bank supervision.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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