Spain's economy outperforms euro zone in 2024 with 3.2% growth

By Inti Landauro and Marta Serafinko

MADRID (Reuters) -Spain's economy expanded by 3.2% in 2024, outstripping official forecasts and far outperforming its euro zone peers, preliminary data from the National Statistics Institute showed on Wednesday.

The Spanish government expects to raise its forecast for this year from 2.4% following the stronger-than-expected performance, which was buoyed by a tourism boom as well as a strong output in agriculture and higher exports.

Economic growth should remain robust this year and next thanks to consumer spending, boosted by falling unemployment and an increase in investment, brokerage Jefferies said in a note to investors.

Immigration, which has helped Spain plug skills gaps and reduce its unemployment rate in the fourth quarter to its lowest level in 16 years, also bolstered GDP.

"This momentum has been based on three main drivers: private consumption, record tourism and strong job creation, mostly thanks to immigration," Javier Molina, Senior Analyst for eToro said in a note to clients.

But the rising cost of living and a housing crisis that has pushed prices through the roof in big cities has dented living standards despite the growth, head of strategy at Renta 4 brokerage Natalia Aguirre told Reuters. She forecast a slowdown in private consumption.

Slow growth among its neighbours in Europe could eventually affect Spanish exports, Molina said.

"If the European economy does not improve, it could weigh on Spain in 2025," he said.

The country's economy expanded 0.8% in the last three months of the year from the previous quarter. Analysts polled by Reuters had expected GDP to grow 0.6% quarter-on-quarter.

The full-year growth rate was faster than the 2.7% projected by the government and the 3.1% predicted by the Central Bank.

"Spain keeps leading the euro zone growth, with a GDP increase four times higher than the euro zone as a whole," Economy minister Carlos Cuerpo said in a statement.

France and Germany lowered their growth outlooks for this year to 0.9% and 0.3% respectively, while Italy expects a 1.2% expansion. All three are due to release GDP data on Thursday.

Spain's fiscal situation is better than its peers', Jefferies said, and it is less likely to suffer from U.S. President Donald Trump's plans to impose trade tariffs.

The budget deficit is set to fall this year and next thanks to higher taxes and cuts in subsidies such as the one on electricity. Spain expects to reduce its budget deficit to 2.5% this year.

(Reporting by Marta Serafinko and Jesus Aguado, editing by Inti Landauro, Andrei Khalip and Toby Chopra)