Lorraine Williamson
While much of Europe braces for economic turbulence, Spain is powering ahead. Figures released by the Spanish National Statistics Institute (INE) confirm the economy grew by 0.7% in the second quarter of 2025, outpacing the previous quarter and bolstering confidence in the country’s post-pandemic recovery.
The uptick might seem modest, but in the current climate of geopolitical uncertainty and faltering global trade, it marks a standout performance. Year-on-year, GDP remains firmly on track with 2.8% growth, cementing Spain’s position as one of the eurozone’s more dynamic economies.
Homegrown momentum: the strength of Spain’s domestic engine
At the heart of this resilience lies a familiar story: Spanish households are spending again, and businesses are doubling down on investment. Consumer activity rose by 0.8%, fuelled by higher purchases of durable goods – a sign that confidence is returning. Meanwhile, companies boosted capital investment by 2.1%, particularly in machinery and equipment – often a bellwether of future productivity.
Even with a slight pullback in public sector spending (down 0.1%), domestic demand added a striking 3.4 percentage points to annual growth. The Ministry of Economy hailed this as evidence of “robust purchasing power and a resilient labour market” – both of which are cushioning Spain from global volatility.
Trade still the weak spot as global tensions bite
While domestic demand surged, Spain’s trade figures tell a different story. Exports rose just 1.1% in Q2 – not enough to offset rising imports, which jumped from 1.5% to 1.7%. As a result, foreign demand effectively subtracted from growth, shaving off 0.1 points quarter-on-quarter and 0.6 points annually.
The Ministry has blamed ongoing international instability and supply chain disruptions for the sluggish performance, as Spanish exporters continue to feel the fallout of conflict, inflation, and shifting demand patterns abroad.
Winners and losers: construction thrives, agriculture suffers
Not all sectors fared equally. Spain’s construction industry posted a 1.5% gain, buoyed by both public infrastructure projects and private housing demand. The services sector – a major driver of employment – also continued to expand, up 1.2%.
Manufacturing grew by 1.1%, lifting the wider industrial sector by 0.8%. But the standout disappointment was agriculture, which contracted sharply by 9.5% – a slump attributed to poor weather, drought conditions, and seasonal effects. With climate pressures mounting, analysts warn that structural reform in Spain’s primary sector may become increasingly urgent.
Labour market hits record high, but productivity picture is mixed
Perhaps the most striking headline is the labour market. Spain reached a record high of 22 million people in employment during Q2 – a level not seen before. The number of full-time equivalent jobs rose 3.5% year-on-year, while wages climbed 7.6%, a combination of job creation and inflation-linked pay deals.
However, productivity presents a more nuanced picture. Output per hour worked rose by 1.5%, but productivity per full-time worker dipped slightly by 0.7% – suggesting an economy still reliant on sectors with lower added value per job, such as hospitality and seasonal services.
2025 forecast upgraded as Spain outpaces eurozone peers
Looking ahead, the Ministry of Economy has upgraded its growth forecast for 2025 to 2.6%, placing Spain among the best performers in the EU. While risks remain – particularly in export markets and agriculture – the broader picture is one of stability and expansion.
Amid inflation concerns and interest rate uncertainty, Spain’s blend of strong consumer demand, job creation and investment is setting it apart from some of its neighbours. The country may not be immune to global shocks, but it appears well-positioned to weather them better than most.
Resilience in the face of fragility
Spain’s economic performance in Q2 2025 underscores a key trend: while the global economy stutters, countries with strong domestic demand and dynamic labour markets are still able to grow. For now, Spain’s internal engine is doing the heavy lifting – and with careful management, it could continue to do so through the year’s second half.
Source: Europa Press