The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts worldwide. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, the Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Executive Summary
Spain is open to foreign investment and actively seeks additional investment as a key component of its COVID-19 recovery. After six years of growth (2014-2019), Spain’s GDP fell 11 percent in 2020 – the worst performance in the Eurozone – due in large part to high COVID-19 infection rates, a strict three-month lockdown, border closures, and pandemic-related restrictions that decimated its tourism and hospitality sectors. By building on healthy fundamentals and fueled by up to 140 billion euros in Next Generation EU recovery funds, Spain rebounded with 5.1 percent GDP growth in 2021, and unemployment improved to 13.3 percent. Economic activity is expected to return to its pre-crisis level in 2023, though Russia’s unprovoked war in Ukraine could threaten the recovery by pushing up energy prices, compounding supply chain disruptions, and stoking inflation. Service-based industries, particularly those related to tourism, and energy-intensive industries remain most vulnerable to the economic shock. Spain’s key economic risks are high public debt levels and ballooning pension costs for its aging population, though these areas are targets for government reforms.
Despite COVID-19’s economic shock, Spain’s excellent infrastructure, well-educated workforce, large domestic market, access to the European Common Market, and leadership on renewable energy make it an appealing foreign investment destination. Spanish law permits up to 100 percent foreign ownership in companies, and capital movements are completely liberalized. According to Spanish data, in 2021, foreign direct investment flow into Spain was EUR 28.8 billion, 17.7 percent more than in 2020. Of this total, EUR 1.6 billion came from the United States, the fifth largest investor in Spain in new foreign direct investment. Foreign investment is concentrated in the energy, real estate, financial services, engineering, and construction sectors.
Spain aims to use its Next Generation EU recovery funds to transform the Spanish economy, especially through digitalization and greening of the economy, to achieve long-term increases in productivity and growth. Full financing is contingent on additional economic reforms beyond labor reform. Spain’s credit ratings remain stable, and issuances of public debt – especially for green bonds – have been oversubscribed, reflecting strong investor appetite for investment in Spain. However, small- and medium-sized enterprises (SMEs), which account for more than 99 percent of Spanish businesses and have been acutely impacted by the COVID-19 pandemic, still have some difficulty accessing credit and rely heavily on bank financing. Small firms also experience more challenges accessing EU recovery funds.
The full document for Spain can be viewed on the U.S. Department of State website.