Why is Spain’s financial system booming? Due to migration – which proves xenophobia doesn’t pay | María Ramírez

The world’s quickest rising main superior financial system final 12 months was probably Spain. In keeping with preliminary official information for 2024, Spain’s GDP grew by 3.2%, virtually 5 occasions the eurozone common and greater than the US, which did fairly properly too. In December, the Economist ranked Spain first amongst 37 principally rich international locations based mostly on 5 indicators: GDP, inventory market efficiency, core inflation, unemployment and authorities deficits. Forecasts for 2025 look good.

Why is Spain doing so properly? One key purpose is immigration. Latest inhabitants flows, notably however not solely from Colombia, Venezuela and different Latin American international locations, in addition to Morocco, have boosted home demand and rejuvenated the workforce. In keeping with the principle labour nationwide survey, almost 90% of latest jobs have been stuffed by employees of overseas origin or twin nationality. Unemployment is at its lowest degree since 2007.

Spain’s development is pushed by a variety of things: a booming tourism trade, public funding supported by the EU’s pandemic restoration funds, rising companies and industrial exports to the European single market and past (particularly since 2021), the expansion of economic and expertise companies, and low power prices because of Spain’s growth of renewables. A few of the labour reforms enacted by the centre-left coalition authorities have additionally put more cash into low-income shoppers’ pockets – notably, the regular enhance within the minimal wage, which has risen greater than 50% for the reason that prime minister, Pedro Sánchez, took workplace in 2018.

Whereas the load of every of those components stays debated, migration remains to be essentially the most continuously cited purpose for Spain’s robust efficiency and maybe its most distinctive benefit in contrast with different international locations. Immigration has additionally visibly modified Spain lately, notably in main cities. Madrid, as an example, now has greater than 1 million residents from Latin America – up from simply 80,000 solely 25 years in the past.

Anecdotal proof exhibits this transformation. In my very own neighbourhood in central Madrid, the preferred bookstore is run by two Argentinian journalists; the cool artisan bakery that retains increasing was co-founded by a Hungarian lady who moved her enterprise from Budapest. A Latin American evangelical church rents an previous grownup cinema for its worship and gatherings; a standard Spanish pastry store has began promoting Venezuelan delicacies subsequent to the lengthy queue that types each different day outdoors the consulate. Not distant, a big signal helps the occasion of the Argentinian president, Javier Milei (with graffiti from his detractors scrawled throughout it).

Not all of the financial information tells a rosy story. Spain nonetheless struggles with low productiveness, an overreliance on the general public sector and low wages (GDP per capita has not grown as a lot as GDP), even when it has improved in these measures too. Tourism, whereas a driving drive for the financial system, has exacerbated housing shortages and fuelled a backlash in opposition to guests, short-term rental platforms and funding funds pushing locals out of town centres.

Immigration has added to the stress on reasonably priced housing, with demand outpacing provide because the inhabitants grows. Some politicians blame wealthy Venezuelan and Colombian patrons for the rising costs in the most costly neighbourhoods of Madrid. And poorer immigrants, notably these from north African international locations, proceed to face discrimination and exploitation by unscrupulous and legal employers or landlords. In the meantime, regional and nationwide politicians are sometimes locked in disputes over housing migrant minors who’ve arrived in Spain alone.

But regardless of these challenges, being a richer nation, in money phrases and in range, is an enviable place in Europe, particularly when Spain is in comparison with struggling economies like these of Germany and Britain.

Stormier occasions might lie forward. Some European neighbours stay economically weak, and world demand may shrink if Donald Trump launches a transatlantic commerce struggle. If a disaster of the dimensions of the 2008 crash have been to recur, immigrants may return to their international locations of origin, leaving Spain with an ageing inhabitants and a dwindling workforce to assist pensions and public companies.

However for now, even when it’s not good, Spain stands as a mannequin for a way migration can energise an financial system and a society. Keir Starmer and different leaders of low-growth economies operating out of concepts ought to take observe. Ideological rigidity in opposition to foreign-born employees isn’t simply xenophobic, it’s economically shortsighted.