With vast growth experienced over the past few years, Spain has well established itself as one of Europe’s economic powers. Despite experiencing reduced growth immediately after the financial crisis, Spain has generated increased investment since 2015 and has become one of the most attractive investment options in the region. With constant reforms that encourage business growth, we explore why Spain has become such an attractive investment destination for years to come.
The People of Spain
Spain has a population of just under 47 million people, with nearly 20 million people being part of the active workforce. Although they experienced a decrease in employment from 2019 into 2020, primarily due to COVID, the levels of employment are projected to increase in 2022.
Although Spain is once again in a growth phase, they still face relatively high levels of unemployment, especially amongst young people. Despite the threat of unemployment which was just less than 17% in 2020, it is expected to drop by nearly 3% over the next 6 years (Statista).
Spain’s population also ranks high on the Human Development Index according to the United Nations (UN). This index was formed in an effort to emphasize that the capabilities of people should also be a leading criterion in determining the development of a country. In 2019 Spain ranked 25 out of 189 countries that were reviewed. The research measured a number of factors which included standards of living, levels of education, and life expectancy amongst other things. Spain is among the countries with the highest life expectancy in the world, with the average person expected to live until up to 83 years old.
Spain is also considered to have a highly educated population. Businesses and investors looking for specific skills and talent, would easily be able to find what they are looking for across an array of different industries.
Prior to the global economic crisis, Spain was experiencing strong growth and was one of the most significant economies in Europe. Despite the positive growth trend, Spain experienced significant difficulty with economic crises, which led to the experience of an economic recession in 2009.
Since the recession started, it had taken more than 5 years for the GDP to recover. Recovery was speedily achieved through increased public spending and constant demand. While recovery has been slowed due to the ongoing effects of Covid-19, Spain is projected to experience growth in the next few years. According to Statista, Spain’s GDP is forecast to grow by 3.8% from 2020 to 2025.
Spain’s Top industries
With the second largest tourism industry in the world, Spain is heavily reliant on tourism as a main source of income. Contributing to almost 11% of Spain’s annual GDP, it is a major source of income as well as employment. Tourism is also linked to Spain’s exports and trade.
Manufacturing of automotive and pharmaceutical goods are the major export commodities produced by the manufacturing industry in Spain. Although only contributing to around 3.5% of the country’s GDP, the automotive industry employs around 9% of the country’s labor force. Spain is also the second largest automobile producer in Europe, only behind Germany.
3. Service industry
As Spain moves to be more modernized and digitized, there has been an increased focus on its industry and service sectors. Spain’s service sector accounts for nearly 70% of production while their industry sector contributes to more than 25% of their nation’s GDP. The main industry sectors include automotive, information and communication technology (ICT), pharmaceutical, food processing, textile, machinery, and iron and steel.
Among all European Union countries, Spain has the second largest proportion of land that is dedicated to agriculture; they are surpassed only by France. With an extensive range of products and items, Spain’s agricultural industry is well known world-wide. Spain’s agricultural industry is mostly made up of vegetables, citrus fruits, olive oil and wine. With more than 30,000 companies in the industry, increased internationalization is one of the main drivers of its growth.
Is Spain a Competitive Nation?
With the Spanish government facing the economy towards growth and the private sector focused on increased profitability, a major question that is being asked is if Spain is competitive. According to research carried out by the World Economic Forum in the Global Competitiveness Index, Spain ranked number 23 in terms of competitiveness in a comparison of 141 countries. The World Economic Forum mainly looked at the level of productivity of an economy to determine its competitiveness.
The research looked at a number of indicators to determine the global competitiveness of a particular nation. Among the determining factors they assessed a country’s infrastructure, the adoption of information and communication technology, levels of innovation, efficiency enhancers, and macro-economic stability. According to these factors the research finds that economies that are more productive are considered to be highly competitive and more likely to experience long term prosperity.
With the current rank Spain has and the expected growth Spain aims to achieve, Spain could enter the top 20 most competitive nations in the years to come.
Consumers in Spain
Robust consumer spending has been one of the primary reasons for Spain’s recovery after the global economic debt crisis. However, the spending habits of consumers in Spain differs significantly from that of the rest their Southern European counterparts.
Consumer spending fell drastically in 2020 but has already seen improvement in 2021. Consumer spending in Spain is expected to reach the pre-covid levels in 2022, with increased spending projected all the way through to 2025.
The top 5 categories for consumer spending in Spain include:
- Housing, water, and electricity
- Food and other non-alcoholic beverages
- Restaurants, hotels
- Other miscellaneous good services
The Statista Global Consumer Survey took an in depth look product interest in Spain, according to the research, consumers in Spain are most interested in the following product and service categories:
- Consumer electronics
- Food and beverage
- Entertainment such as books, movies, music, and games
Top Reasons to Invest in Spain
Here are the main reasons your business should consider investing in Spain:
1. Increase in consumer spending
With recovery bound and consumers projected to increase their spending, businesses looking to move into the region should do so now to establish their presence in the market. Consumer spending is expected to exceed 17, 600,000 USD in 2022. The strong spending is not only a positive sign for economic growth but also for an increase in profitability for companies in the private sector.
2. Location and trade options
Spain’s location allows for easy access and trade with countries all across Europe, the Middle East, and North Africa. It also has trade links with some countries in South America. Being in such a central location affords Spain various strategic benefits. With this ideal location, Spain has also developed a number of strategic trade partnerships that simplify trade activities in the region.
As a member of the European Union (EU), Spain has access to market of more than 500 million people. Additionally, Spain has more than 20 bilateral agreements with various countries in EMEA which have been made to avoid double taxation. Furthermore, they have 17 agreements which avoid double taxation in a number of Central and South American countries.
Spain’s infrastructure has improved, digitized, and modernized over the past few decades, which makes it stand out from its other Southern European neighbors. Spain’s quality of transport and trade-related infrastructure has been considered higher than the regional average according to the World Bank. Their rail, maritime and subway systems are considered to be amongst the world’s best.
Furthermore, Spain has 3 of the top 10 container shipping ports in Europe, with the Port of Algeciras, Port of Valencia, and Port of Barcelona all being major shipping ports on the continent.
Spain’s digital infrastructure is also very impressive with a robust tech sector that presents huge opportunities. Spain boasted a more than 80% internet usage in 2020 and had the 34th highest internet penetration in the world in the same year. The vast deployment of fiber optic cable allows for high-speed internet connections creating more opportunities in a digital space.
The Spanish government has implemented many policies to indicate their openness to investment. The government has adopted a pro-investment stance, by implementing more relaxed regulations for businesses and increasing incentives for potential investors. Spain is currently ranked 9th in terms of foreign direct investment received, according to the World Investment Report by UNCTAD.
5. Favorable taxes and legal framework
After the economic crisis and the pandemic, there were many financially rewarding incentives given to the private sector by Spain’s legislative body. Furthermore, many of the foreign investment factors had been granted through the Spanish Act 14/2013. The main aim of this law was to aid those investors who wish to start a business in Spain.
The government has also implemented a number of tax incentives similar to the EU average. For investors who continually invest, the country offers various subsidies and grants. The tax incentives and exemptions have been implemented to promote innovation and the creation of jobs.
Final Thoughts on Investing in Spain
Spain is and will continue to be one of the most attractive places in Europe to invest in over the next few years. Aside from the openness to investment, they are moving towards the digital era at a good pace, they boast strong infrastructure, they have strong rule of law and effective legal system, and their GDP is projected to increase in size.
Spain is the third largest investment market amongst all countries in the European Union. So, with such a positive outlook, any investor looking towards Europe needs to consider Spain as a potential investment option.
INS Global in Spain
INS Global is a world renowned PEO company that helps businesses expand internationally. They have helped hundreds of companies grow their business in Spain and other parts of the world. Their services include global recruitment, PEO and invoicing. INS Global has established systems that aim to help you get started in Spain or any new country you intend to carry out your operations in. Get in contact with INS Global today for expert expansion advice.