General Information » Economy » Spain Overview

Spain has the eighth largest economy in the world, according to figures in 2006. On joining the European Union in January 1986, Spain reformed its legislation and was helped to modernize its economy with grants from the European Regional Development Fund. This led to steady GDP growth and a significant reduction in unemployment and inflation. In the early nineties the economy felt a backlash from the late 80s recession, but recovered during the Aznar administration (1996-2000), thanks to increased private consumption and consumer confidence. The potentially problematic transition from the peseta to the euro in January 2002 was counterbalanced by increased trade with other European nations.

Spain is currently one of the most prosperous economies within the EU. It has been consistently above the OECD (Organization for Economic Co-operation and Development) average over the last decade. Another encouraging sign is the improvement of Spain’s credit rating from AA to AA+, just one lower than Euro top dog Germany. There are growing concerns, however, that Spain’s current consumer boom is unsustainable. The addition of ten new EU members will challenge the economy, as EU funds become more widely distributed. Other worries include how to reduce unemployment, which stood at 8.6% in 2006, and Europe’s highest rate of inflation, estimated at 3.8% and rising due to a 150% increase in house prices.

But, Spain also has the world’s second largest tourism industry, which is its main source of income. If part of Spain’s tourist appeal lies in its sunny weather, its thriving agriculture is equally attributable to the Mediterranean climate; no country in the world produces more olive oil and only two nations press more wine. Its best known regions are Penedes, La Rioja and Jerez. Spain also tops all other European countries in the farming of lemons and oranges, which is only natural, for it was in the groves of Andalusia that the Moors first introduced the fruits to Europe. Overall, agriculture contributes 3.9% of the country’s GDP.

The other primary industries of Spain include textiles, chemicals, metals and metal manufacture, shipbuilding, automobiles and machine tools. Internationally, France, Germany and Portugal are the main purchasers of Spanish goods, while Germany, France and Italy are the main importers of goods to Spain. The main imports include petroleum, iron and steel, transport equipment and consumer goods. But Spain’s trade deficit continues to rise; to €8.49 billion at the last count. Only the US has a higher figure.