Spain | Facing the challenge of continuing to grow and converge

Summary

The Spanish economy continues to grow faster than the euro area, driven by strong employment, services, and domestic demand. However, structural challenges remain in productivity, investment, and housing that must be overcome to achieve real convergence with Europe.

Key points

• Key points:
• In the first quarter of 2026, GDP grew by 0.6% quarter-over-quarter and 2.7% year-over-year, compared with weak euro area growth of 0.1% and 0.8%, respectively.
• Nearly 80% of employment growth since 2022 is attributable to increases in employed foreign-born workers, making job creation the main driver of GDP growth.
• Spain continues to lag behind advanced economies in GDP per hour worked, constrained by public investment at near-lowest levels in Europe and by an excessively fragmented business landscape.
• Artificial intelligence represents a major opportunity to boost potential growth, but taking advantage of it will require improvements in human capital and greater scaling capacity among companies.
• The housing supply shortage is limiting labor mobility and making it harder to attract talent to dynamic regions, calling for improved regulatory efficiency and reduced urban planning bottlenecks.

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