​The 2023 European Commission Country Report on Spain provides a comprehensive analysis of the nation's economic performance, labor market dynamics, inflationary trends, fiscal health, and the impact of external shocks, particularly in the context of the ongoing geopolitical tensions.​

In 2022, Spain's economy exhibited resilience amid global uncertainties, achieving a real GDP growth of 5.5%. This expansion was primarily driven by robust external demand, notably a significant rebound in international tourism, and dynamic private consumption. The latter was bolstered by a strong labor market and fiscal support measures. However, challenges emerged in the latter half of the year as purchasing power declined, financial conditions tightened, and economic uncertainty intensified, adversely affecting private expenditure, especially among vulnerable and low-income households.​

The labor market demonstrated remarkable strength, with employment growing by 3.1% in 2022, surpassing pre-pandemic levels and reaching nearly 70% of the working-age population, though still below the EU average. The implementation of the 2021 labor market reform contributed to a steady decline in temporary employment within the private sector amid ongoing job creation. Consequently, the unemployment rate fell to 12.9%, the lowest since 2008. Nonetheless, it remains almost double the EU average, with persistent structural issues such as elevated long-term and youth unemployment and a high prevalence of fixed-term contracts in the public sector.​

Despite moderate nominal wage growth of 2.9% in 2022, high inflation led to a substantial decline in real wages by 5%. The energy shock, primarily transmitted through import prices, significantly influenced Spain's inflationary landscape. Although the country had limited direct exposure to supply disruptions, its substantial reliance on international energy markets rendered it vulnerable. The surge in energy prices propelled the Harmonized Index of Consumer Prices (HICP) inflation to an average of 8.3% in 2022, peaking during the summer months. While energy inflation began to subside in the latter half of the year, core inflation, particularly in food products and hospitality services, accelerated, leading to increased consumer prices.​

Spain's competitiveness remained robust despite the energy shock. Significant deterioration in terms of trade was offset by labor productivity gains and restrained wage increases, which helped maintain cost competitiveness. Additionally, unit profits experienced a strong recovery. The country's export performance was notably positive, underpinned by the resurgence of international tourism, enabling Spain to regain global market share.​

On the fiscal front, the deficit continued to decline despite substantial government measures aimed at mitigating the impact of elevated energy prices. In 2022, the estimated cost of these measures amounted to 1.6% of GDP, with only 0.5% of GDP allocated to targeted support for vulnerable firms and households. Nevertheless, a double-digit increase in tax revenues offset the fiscal impact of these interventions, reducing the fiscal deficit from 6.9% of GDP in 2021 to 4.8% in 2022. The debt-to-GDP ratio also decreased from 118.3% in 2021 to 113.2% in 2022, supported by robust nominal GDP growth.​

Looking ahead, the economy is projected to expand by 1.9% in 2023. Potential downside risks include the prolonged tightening of financial conditions and further disruptions in energy markets. However, GDP growth is expected to gradually accelerate throughout the year, driven by stronger private consumption and the continued normalization of tourism. The implementation of the Recovery and Resilience Plan, along with cohesion policy programs, is anticipated to bolster investment growth. Moderate job creation is projected to support household income, while inflation is expected to ease, contributing to a recovery in real wages.​

In summary, Spain's economy has demonstrated significant resilience in the face of external shocks and domestic challenges. While notable progress has been made in areas such as employment and fiscal consolidation, ongoing structural issues, including high unemployment rates and inflationary pressures, necessitate continued policy attention to ensure sustainable and inclusive economic growth.