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Spain: Macroeconomic Country Outlook

  • According to GlobalData, the real GDP growth increased to 5.1% in 2021, following a 10.8% contraction in the previous year
  • Spain was ranked 30th out of 152 nations in the GCRI Q2 2022
  • According to GlobalData, the wholesale, retail and hotels sector is forecast to grow at a CAGR of 5% over 2022–24

According to Invest in Spain, Spain is the second largest automaker in Europe and eighth largest in the world. The Spanish automotive industry accounts for 18% of total exports and 10% of Spain's GDP. On average, the industry (assembly and the automotive supply sector) spends EUR4 billion ($4.7 billion) annually on enlarging and updating plants. 

Key findings

  • New law to kickstart digital nomad visas in 2022: Spain is proposing a visa that will allow travelers to live and work in the country for up to a year with the option of an additional two extensions. Under the Startup Act, the new visa was proposed as a draft. By offering tax incentives to small enterprises, the new visa will encourage entrepreneurship in the area in addition to luring remote workers. Remote workers earning at least 80% of their income from non-Spanish enterprises are permitted to live in Spain for up to three years without being granted residency. The visa would apply to foreign nationals from nations outside of Europe, including those living in the UK post Brexit.
  • Domestic and overseas demand are expected to drive economic growth in 2022 and 2023: According to the European Commission report (May 2022), GDP is predicted to grow by 4.0% in 2022 and 3.4% in 2023. Since the summer of 2021, resurgent tourism has been the main driver of economic development, which is likely to continue throughout 2022. As a result, net exports will make a significant contribution to GDP growth. European Commission expects economic growth to accelerate further from Q3 2022 due to reactivation of private spending, even though households' purchasing power has deteriorated due to rising inflation and a decrease in real earnings. The unemployment rate is forecast to decline from 14.8% in 2021 to 13.4% in 2022.
  • Spain’s stance on Ukraine crisis: As Spain is a part of European Union, the Union imposed sixth package of sanctions on Russia which contains a complete ban on all Russian seaborne crude oil and petroleum products. The package will also cover export restrictions on chemicals that could be used to manufacture chemical weapons. Along with imposing sanctions, Spain has supplied 20 tonnes of offensive medical and military material to Ukraine as Russia escalates attack. Spain delivered anti-aircraft missiles and tanks to Ukraine. Spain has sent 800 soldiers on NATO mission on border with Russia to help Ukraine. Spain has historically had conflicting feelings toward Russia.
  • Spain is ranked 30th out of 190 countries in the World Bank’s Doing Business 2020 ranking: In terms of ease of doing business, Spain’s score (77.9 out of 100) was lower than that of Germany (79.7) and the OECD high income regional average (78.4). However, the score was above the scores of nations such as Portugal (76.5), Switzerland (76.6) and Italy (72.9). It takes seven procedures to start a business in Spain as compared to the OECD high income average of 4.9 procedures. The country was ranked first in trading across borders out of 190 nations, according to the World Bank, Doing Business Report (2020).
  • Digital Spain 2025: Boost for SMES: On July 23, 2020, the government approved Digital Spain 2025 program. The program is made up of a package of 48 measures, which are articulated around ten strategic axes. The objective of the project includes (i) connectivity (ii) promotion of 5G technology (iii) enhancement of digital skill in the country (iv) cybersecurity (v) digital transformation of public sector along with business and entrepreneurship (vi) digitalization of projects (vii) audiovisual hub in the nation (viii) artificial intelligence. The program aims to boost the economy and SMEs through digitization, which is expected to complete by 2025.  
  • Skyrocketing rate of inflation in 2022: Due to Ukraine crisis the price level has increased globally because of supply chain disruptions. In Spain, the inflation rate in the month of June 2022 touched 37 years high of 10.2%. The inflation rate was 8.7% in May 2022 and 2.7% in June 2021. Spain experienced inflation as a result of rising food prices, and increased energy costs and hotel, café and restaurant prices. Against this backdrop, GlobalData has revised Spain’s inflation projection upward for 2022 to 7.7% in June 2017 from its earlier projection of 3.7% in February 2022.

Key fundamentals

Sectoral outlook

  • Tourism sector to recover: Spain’s tourism sector is expected to come close to reaching its pre-pandemic size in 2022, although Ukraine's war and consequent rise in price level may prevent a full recovery this year. According to official statistics, the number of international tourists visiting Spain in April 2022 increased by almost ten times from the same month the previous year to 6.1 million, which was close to the 7.1 million visitors that came in April 2019. The amount spent by foreign visitors in Spain in April was EUR6.9 billion ($8.2 billion). After being severely damaged by the pandemic, Spain unveiled a EUR720 million ($851.7 million) package in December 2021 to assist rebuild the tourism sector.
  • Card payments in Spain to grow by 11.4% in 2022: Spain’s total card payments value is forecast to register a compound annual growth rate (CAGR) of 8.8% between 2021 and 2025 to reach EUR321.4 billion ($380.2 billion) in 2025. While cash remains the most preferred method of payment in Spain, the use of payment cards has grown during past few years, supported by government initiatives to increase financial awareness among citizens, and efforts by banks to promote electronic payments. The growing acceptance of payment cards by retailers and rising adoption of contactless technology are also anticipated to push card payments and thereby, reduce cash dependence within the economy over the coming years.
  • Strong growth potential for ICT sector: Over the previous decade, the ICT industry has been one of Spain's fastest-growing, and digitalization is a key role in modernizing the production model and boosting the country's economic recovery following the epidemic. The Spanish government’s commitment to digitalization is strong, as highlighted in the Digital Spain Plan 2025, which features specific strategies to promote technologies that are crucial for Spain: 5G, cybersecurity, Big Data, and Artificial Intelligence. Foreign ICT enterprises and entrepreneurs choose Spain for its stable telecommunications infrastructure network and good connectivity. The 5G network deployment plan on the 700 MHz frequency band in Spain has been announced by Orange in February 2022. As a result of deployment, residents of about 30 towns and cities in the Community of Madrid will have access to the high download speed and capacity, lowest latency for online gaming, and possibility of simultaneously connecting more devices to the mobile network from indoor locations with high bandwidth availability. More than half of the Spanish population is already covered by Orange's 5G service, and there are already 620,000 5G subscribers, according to Orange's most recent financial results, which the firm announced on September 30, 2021.

GlobalData Country Risk Index (GCRI) – Q2 2022

Spain was ranked 30th out of 152 nations in the GCRI Q2 2022. The country’s risk score is in the low-risk nations band (below 30). Spain's risk score across major PESTLE parameters as well as overall risk score in GCRI Q2 2022 (29.4) is lower than the world average (44.0). The presence of higher macroeconomic risks, higher risks associated to demographic changes, including higher dependency ratios and declining work force, political uncertainties arising from multi-party coalitions, and higher complexities in the regulatory environment could have an adverse impact on the business and investment climate in the country. 

GCRI Methodology

GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.

The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Western European countries in this publication include Austria, Belgium, Denmark, Finland, France, Spain, Greece, Italy, the Netherlands, Norway, Portugal, Ireland, Spain, Sweden, Spain, Luxembourg, Iceland, and Switzerland.

About the report

GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.

More details: Macroeconomic Outlook Report: Spain



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