- GDP (PPP):
- $1.9 trillion
- 2.5% growth
- 2.7% 5-year compound annual growth
- $40,139 per capita
- Inflation (CPI):
- FDI Inflow:
Spain’s economic freedom score is 66.9, making its economy the 58th freest in the 2020 Index. Its overall score has increased by 1.2 points, due primarily to a higher fiscal health score. Spain is ranked 31st among 45 countries in the Europe region, and its overall score is slightly below the regional average and well above the world average.
The Spanish economy has been rated moderately free for nine years. GDP growth has decelerated in the past two years as private consumption growth has slowed slightly and external demand has softened more significantly.
The principal obstacles to greater economic freedom in Spain are the lack of labor freedom and, especially, the size and the cost of government. If government spending and related sovereign borrowing were reduced, a liberated private sector could boost growth and employment. Unfortunately, the socialist government has proposed an ambitious plan for new spending programs as well as rollbacks of the last center-right government’s labor code reforms.
Since returning to democracy in 1975, Spain has become the eurozone’s fourth-largest economy. The government in Madrid removed a rogue regional government in Catalonia after an illegal 2017 independence referendum, but the December 2018 regional elections resulted in the installation of another pro-independence cabinet. A November 2019 snap election resulted in an even more fragmented parliament, with the conservative Vox party surging to third place at the expense of the main center-right People’s Party. Prime Minister Pedro Sánchez’s ruling center-left Spanish Socialist Workers’ Party was forced to form an unstable minority coalition government with the radical left Podemos party. Spain’s diversified economy includes manufacturing, financial services, pharmaceuticals, textiles and apparel, footwear, chemicals, and a booming tourism industry.
Spanish law protects property rights. There generally are no restrictions on foreign ownership of real estate. The land registration system is rigid but functions efficiently. The judicial system is open and transparent but sometimes slow-moving. Judges are in charge of prosecutions and criminal investigations. The government enforces anticorruption laws on a generally uniform basis. Concerns about official corruption often center on campaign financing.
The top individual income tax rate is 45 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax. The overall tax burden equals 33.7 percent of total domestic income. Government spending has amounted to 41.5 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 3.4 percent of GDP. Public debt is equivalent to 97.0 percent of GDP.
The overall regulatory environment remains burdensome, but bankruptcy laws, which were reformed in 2014, are fair and transparent. Labor-market reform is urgently needed both to facilitate hiring and job growth and to bring more workers into the formal economy. The government has stepped up efforts to subsidize purchases of electric cars, light-commercial vehicles, and motorcycles.
The total value of exports and imports of goods and services equals 66.6 percent of GDP. The average trade-weighted applied tariff rate (common among EU members) is 1.8 percent, with 637 EU-mandated nontariff measures reportedly in force. Nearly all sectors are open to foreign investment, and approval procedures have been streamlined. The financial sector has regained its stability, and the number of nonperforming loans continues to decline. There are 12 banking groups.