2021 Index of Economic Freedom

Spain

OVERALL SCORE69.9
WORLD RANK39
Rule of Law

Property Rights76.4

Judicial Effectiveness65.4

Government Integrity70.3

Government Size

Tax Burden61.7

Government Spending48.1

Fiscal Health69.8

Regulatory Efficiency

Business Freedom66.3

Labor Freedom57.9

Monetary Freedom83.5

Open Markets

Trade Freedom84.0

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 47.1 million
  • GDP (PPP):
    • $1.9 trillion
    • 2.0% growth
    • 2.8% 5-year compound annual growth
    • $42,214 per capita
  • Unemployment:
    • 14.0%
  • Inflation (CPI):
    • 0.7%
  • FDI Inflow:
    • $12.4 billion

Spain’s economic freedom score is 69.9, making its economy the 39th freest in the 2021 Index. Its overall score has increased by 3.0 points, primarily because of an improvement in government integrity. Spain is ranked 24th among 45 countries in the Europe region, and its overall score is below the regional average but above the world average.

The Spanish economy remained only moderately free again this year. To make the jump back into the mostly free category from which it fell nine years ago, Spain needs to concentrate on reducing the size and cost of government. If government spending and related sovereign borrowing were cut, and if the labor market were liberalized, the private sector would have a good chance to boost growth and employment.

IMPACT OF COVID-19: As of December 1, 2020, 45,511 deaths had been attributed to the pandemic in Spain, and the economy was forecast to contract by 12.8 percent for the year.

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Background

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. Prime Minister Pedro Sánchez’s center-left Spanish Socialist Workers Party heads a minority coalition with the radical-left Podemos party. November 2019 elections produced a fractured parliament with the conservative Vox party surging to third place at the expense of the center-right People’s Party. Scandal-plagued former King Juan Carlos I has lived in self-exile since August 2020. Spain’s diversified economy includes manufacturing, financial services, pharmaceuticals, textiles and apparel, footwear, chemicals, and a booming tourism industry.

Rule of LawView Methodology

Property Rights 76.4 Create a Graph using this measurement

Judicial Effectiveness 65.4 Create a Graph using this measurement

Government Integrity 70.3 Create a Graph using this measurement

Property rights are protected by law. The property registration system functions efficiently. The judicial system is independent, open, and transparent but sometimes overburdened and slow. Case backlogs are often long. Concerns about official corruption often center on party financing. Spain is ranked 30th out of 180 countries in Transparency International’s 2019 Corruption Perceptions Index, but its overall score (62) is one of the lowest in Western Europe.

Government SizeView Methodology

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 34.4 percent of total domestic income. Government spending has amounted to 41.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.7 percent of GDP. Public debt is equivalent to 95.5 percent of GDP.

Regulatory EfficiencyView Methodology

Spain lags in development of business freedom compared to many other countries, continuing a downward trend that began in 2014. The duality of the labor market, composed of permanent workers with full benefits and temporary workers with fewer benefits, is an economic risk. According to the World Bank, subsidies and transfers account for about two-thirds of the government’s annual budget.

Open MarketsView Methodology

As a member of the EU, Spain has 45 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 3 percent, with 639 EU-mandated nontariff measures in force. Most sectors are open to foreign investment, and capital movements have been liberalized. The financial sector’s overall condition continues to improve. Use of banking services is nearly universal in the adult population.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland81.9-0.1
2Ireland81.40.5
3United Kingdom78.4-0.9
4Estonia78.20.5
5Denmark77.8-0.5
6Iceland77.40.3
7Georgia77.20.1
8Lithuania76.90.2
9Netherlands76.8-0.2
10Finland76.10.4
11Luxembourg760.2
12Sweden74.7-0.2
13Austria73.90.6
14Czech Republic73.8-1.0
15Norway73.40.0
16Germany72.5-1.0
17Latvia72.30.4
18Armenia71.91.3
19Cyprus71.41.3
20Bulgaria70.40.2
21Malta70.20.7
22Belgium70.11.2
23Azerbaijan70.10.8
24Spain69.93.0
25Poland69.70.6
26Romania69.5-0.2
27North Macedonia68.6-0.9
28Slovenia68.30.5
29Portugal67.50.5
30Serbia 67.21.2
31Hungary67.20.8
32Kosovo66.5-0.9
33Slovak Republic66.3-0.5
34France65.7-0.3
35Albania65.2-1.7
36Italy64.91.1
37Turkey64-0.4
38Croatia63.61.4
39Montenegro63.41.9
40Bosnia and Herzegovina62.90.3
41Moldova62.50.5
42Russia61.50.5
43Belarus61-0.7
44Greece60.91.0
45Ukraine56.21.3
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