By Joshua Kirby and Paul Hannon

Spain's economy grew last year at a pace that likely outstripped its European peers and even the U.S. Tourists and immigrants alike contributed to that world-beating growth, which experts say is set to continue apace.

Gross domestic product was 3.2% higher in 2024 than it was in 2023, Spanish statistics authority INE said Wednesday. That is faster than the 2.8% growth the International Monetary Fund estimates for the U.S. economy over the same period, and far ahead of the expansion of just 0.8% the IMF has penciled in for the wider 20-member eurozone. Figures for the U.S. and eurozone will be released Thursday. Growth showed no signs of slowing in the year's final months, INE said, with GDP up 3.5% from a year earlier.

Spain's economy is being fuelled by two kinds of movement of people: tourism and immigration. Arrivals of jobseekers from overseas are bolstering a working-age population that would otherwise be in decline, and many of those immigrants work in hotels and restaurants or in other tourism jobs.

"How have we done this?" asked Javier Díaz-Giménez, a professor of economics at the IESE business school. "A lot of immigrants, especially in tourism and services."

Those jobs exist thanks to the roughly 94 million tourists who visited the Iberian kingdom last year. That keeps Spain second only to neighboring France in popularity among global tourists. Growing some 10% on year, arrivals to Spanish shores represent the equivalent of a little more than the population of Turkey touching down in a country that is smaller than Texas.

Spain has for decades been a favorite destination for sun-starved northern Europeans. Britons make up by far the largest number of tourists in Spain at more than 17 million a year, or around a quarter of the entire U.K. population. A similar share of the Dutch populace visits every year; the figure for rain-soaked Ireland is closer to half.

But Spain's beaches, cities, gastronomy and heritage are increasingly popular also with visitors from Asia and, especially, the U.S., with Americans making up the fastest-growing cohort for much of last year, according to INE figures. In 2024, Spain benefited from the conflict in the Middle East, which made some tourists wary of rival destinations in the eastern Mediterranean.

It is more and more common to run into Americans in the beach town of Sitges, a little way down the Mediterranean coast from Barcelona, said New York City-based Michael Steven Grant, who bought an apartment there with his partner four years ago, visiting for a few weeks every three months.

"Flights have proliferated from the East Coast, everything is very full now," said Canadian-born Grant, 64 and semi-retired from the health-insurance business.

"U.S. travelers are flocking to Spain for its idyllic beaches and vibrant cities," a spokesperson for online travel firm Expedia told The Wall Street Journal. Flight-search data showed American interest in Spain rising by one-fifth on year, Expedia said.

Still, the data suggest that an existing problem is being compounded. The biggest jumps in interest from U.S. tourists were for Spanish destinations that already draw millions of visitors every month, including the Balearic islands in the Mediterranean Sea and the Canary Islands off the coast of Africa.

These areas, along with the Catalan capital Barcelona and the southern city of Malaga, are among hotspots that have seen protests from locals indignant at rising house prices, overcrowding and the squeezing out of local commerce.

Thousands of locals marched through Barcelona this summer demanding action to reduce visitor numbers and make homes more affordable. In response to the anger, the city government said in July that by 2028, it would eliminate the practice of renting flats to tourists rather than residents by stopping all new licenses and declining to renew existing ones.

"Access to housing for the people of Barcelona is our priority," Socialist Mayor Jaume Collboni said at the time.

The centrality of tourism to economic expansion is itself a problem, said one of the organizers of the summer's protests, the Assembly of Neighborhoods for Tourism Degrowth.

"Tourism, as it is understood today, implies the funneling of public money to private interests and job and housing insecurity for local populations, as well as pollution and destruction of the planet," a spokesperson for the association told the Journal.

Still, the rise in tourism offers an important route into work for the migrant workers who arrive in Spain.

"The average Spanish worker is no longer willing to work in these fields, which have been promptly taken up by the immigrant population," researchers Gemma Canoves Valiente and Asuncion Blanco Romero at the Autonomous University of Barcelona wrote in a paper.

"That population sees in this part of the labor market an opportunity to establish themselves in Spain and better their economic position," they wrote.

Indeed, foreign workers in Spain have a higher rate of participation in the workforce than their counterparts do in many of the eurozone's other major economies, including France, Germany and the Netherlands, Bank of Spain economy chief Angel Gavilan wrote in a recent report. Immigration can claim to account for around one-fifth of Spain's total per-capita economic growth between 2022 and 2024, the report showed.

Without immigrants, Spain's population would be shrinking every year; the country's birthrate is among the lowest in Europe. Thanks to net migration, the population increased by 500,000 in the 12 months to the beginning of last year, reaching around 48.6 million. Spain benefits from its linguistic and cultural ties to Latin America, where economic and political turbulence encourage large-scale emigration. Spain also attracts foreign residents lured less by economic advantage than by lifestyle; hundreds of thousands of Italians and Britons hold residence in Spain, for example.

Spain's attractiveness to tourists and immigrants alike should keep its growth trending ahead of its European neighbors in the coming years.

"Where Spain really stands out is in a sustained and rapid increase in the working age population, driven by immigration," economists at JP Morgan wrote in a recent research report. "Spain appears reasonably well placed to maintain its growth advantage over other large euro-area countries."

Other factors currently smiling on Spain include low energy costs. The country, which imported little Russian gas, emerged largely unscathed from the 2022 energy shock that in other parts of Europe drove up costs for consumers and industry alike and has proved debilitating for much of the European economy.

The Spanish government has also made heavy use of European funds aimed at rebuilding from the global pandemic, and is at the forefront of the climate transition, with not far from half of its total energy production originating from renewables like solar and wind in 2022, according to figures from the International Energy Agency.

Still, those hotter, drier summers and more frequent floods at other times of the year may eventually persuade tourists to look elsewhere.

"Climate change may slow the flow," IESE's Díaz-Giménez said.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby and to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

January 29, 2025 03:18 ET (08:18 GMT)

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