Spain | Grow without immigration?

Summary

Population aging will make immigration necessary in the coming years. This should be compatible with an effort to diversify the sources of growth.

Key points

• Key points:
• Demographics represent a significant drag on future growth. According to Spain’s National Statistics Institute (INE), the population born in Spain between the ages of 16 and 65 has declined by just under 700,000 people since 2019.
• This trend, which will intensify over the next few years, limits the economy’s capacity to create jobs and, therefore, the size the economy can reach.
• In recent years, this disadvantage has been offset by higher immigration. According to the INE, the total working-age population has increased by more than 1.6 million people since 2019.
• If immigration were to stop, sustaining the contribution of employment to growth would require relying on other levers, such as increasing labor force participation, reducing involuntary part-time employment, and lowering the structural unemployment rate.
• The alternative would be to promote a more balanced model with a growing contribution from capital and productivity. The challenge here is to establish an environment that generates the right incentives to increase investment and foster innovation.

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