Spain Keeps Outgrowing the Euro Area, and Two of the Three Reasons Are Uncomfortable

Spain has been growing faster than most of the euro area for three consecutive years, and the explanation is consistent across forecasters. Tourism is running at record volumes, domestic consumption has held up better than the models expected, and immigration is adding to the working age population at a rate that raises output arithmetically.

The last of those is the least discussed and does the most work. An economy that adds workers grows, before productivity enters the argument at all. Spain's population has risen through migration in a decade when much of Europe's has not, and a meaningful part of the growth gap is that single fact.

It is also the input under the most political pressure. The Ceuta crossings and the argument that followed have made migration the central issue of the coming electoral cycle, and the growth model quietly depends on the flows continuing. That tension has not been named clearly by anyone with an interest in either side of it.

Tourism has the opposite problem. It is politically popular in aggregate and increasingly unpopular in the places that host it, as the protests in Mallorca and the Canaries have made plain. Growth that depends on visitor volumes is growth that depends on residents tolerating those volumes.

Consumption is the healthiest of the three and the hardest to sustain without the other two. Households have spent because employment has been strong and inflation has been contained, and both of those are downstream of the same tourism and migration story. The outperformance is real. It rests on foundations that the country has not decided whether it wants.