Spain | An expansive economic cycle in employment

Summary

Economic growth in Spain has been based on extensive factors (which may be temporary): incorporating more people into the labor market has been decisive. In contrast, productivity (the intensive and unlimited factor of growth) has yet to take off.

Key points

• Key points:
• Since the fourth quarter of 2019, GDP has increased by 8 percentage points (5.9 pp in the EU), while the working-age population has increased by 6.4 percentage points (2.0 pp in the EU). This has resulted in a real increase in GDP per working-age person of just 1.5 percentage points, lower than that observed in the EU (3.8 pp).
• GDP per employed person is still 0.3 points below its pre-pandemic level, while employment among the working-age population is 1.8 points higher.
• Job creation has been strong thanks to immigration (84% of new hires since late 2021 are foreign-born or have dual citizenship), but this has not been accompanied by a proportional increase in labor productivity.
• As highlighted by the Economic Cycle Observatory from BBVA Research, FEDEA, and the Rafael del Pino Foundation, the challenge of creating more productive jobs is now threatened by a new global uncertainty: the protectionist shift in the United States.
• At the Observatory, we carry out simulations of the increases in U.S. tariffs under different hypotheses, showing that the cumulative impact on Spanish GDP between 2025 and 2027 could be about three-tenths of a percentage point lower than the baseline scenario. The simulations also suggest that its effects on the trade balance would be nearly neutral, although exports would be 1.6% lower than in the baseline scenario.

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