Written by Daniel LacalleInflation, GDP inflated by public spending and immigration, and concealed unemployment form the backbone of what the Sánchez administration calls an “economic miracle.”
Spain ends 2025 with a Consumer Price Index (CPI) above the eurozone average and higher than any of Europe’s major economies. Since Sánchez took office, cumulative CPI inflation has reached 24.8%. Meanwhile, housing and food costs have increased at nearly double the headline rate.The erosion of purchasing power and the growing impoverishment of Spanish households stem from years of interventionist policy. Home prices have jumped more than 38%, housing-related costs (including rent, utilities, and maintenance) have climbed over 30%, and food prices have risen roughly 38%. Studies examining the “real shopping basket” show essential goods increasing between 40% and 60% from 2019 to 2025—far outpacing official inflation figures.Between 2019 and 2025, real wages declined by 0.3%, according to CaixaBank. The situation is even worse when considering net real wages, which have dropped by more than twice that amount. The government’s refusal to adjust tax brackets for inflation, combined with higher fiscal pressure on households and businesses, has deepened the loss.GDP Growth, Productivity, and the Statistical MirageGovernment messaging points to rising productivity and GDP per capita, conveniently using the pandemic collapse as the baseline. Because Spain experienced one of the sharpest downturns, the rebound now appears stronger. However, labor productivity per employed person relative to the EU average has slipped from 99.8% in 2018 to 97%. A rebound is not genuine growth—particularly when GDP is propped up by expanded public spending and immigration.According to CaixaBank Research, about one-quarter of Spain’s net real GDP growth between 2019 and 2025 is directly attributable to increased public consumption. The share would be higher if EU-funded public investment and subsidies categorized elsewhere were included. The IMF projects real GDP per capita growth of just 1.1% between 2017 and 2026.A sharp rise in immigration masks a fragile productivity model sustained by debt and public expenditure. Spain’s socialist growth strategy—fueled by immigration and government spending—results in weak productivity gains and stagnant GDP per capita, while relying on annual net debt issuance exceeding €50 billion. It is an unsustainable path.Measured in purchasing power standards, Spain’s GDP per capita was 91% of the EU-27 average in 2019 and now hovers around 90%. Despite claims of strong growth, the country remains below its pre-Covid relative position. Average annual real GDP per capita growth from 2019 to 2025 stands at only about 1.1–1.4%. Although Spain finally surpassed its 2019 real GDP per capita by 2025, the six-year per-person gain is modest—masked by elevated public spending and one-off EU funds, and far less impressive than cumulative headline GDP figures suggest.Hidden Unemployment: Another Defining FeatureThe 2021 labor market reform required temporary and seasonal contracts to be converted into “discontinuous permanent” contracts. As a result of this statistical change, individuals under these contracts are not classified as unemployed during inactive periods—even if they receive unemployment benefits. Consequently, in nine provinces, more people receive unemployment benefits than are officially counted as unemployed.SEPE data reveal that in Almería, Huelva, Jaén, the Balearic Islands, Huesca, Teruel, Soria, Castellón, and Cáceres, the unemployment coverage rate exceeds 100%, meaning benefit recipients outnumber officially registered unemployed individuals.In January 2019, there were 280,389 jobseekers listed as having an “employment relationship.” By December 2025, that number had surged to 892,933—more than tripling. Effective unemployment has therefore seen little real improvement since 2019, with the actual unemployment rate estimated at 13.6%, compared to the official 9.9%.The activity rate has remained stuck at 59% since 2019, further highlighting labor market fragility. By the end of December 2025, 3,854,911 people were registered with SEPE as seeking work—1,446,241 more individuals not working than the official unemployment figure indicates. While registered unemployment fell by 152,048, real unemployment—measured as registered individuals not working—increased by 50,609.Those excluded from official unemployment data reached 1,893,134 in December, representing 44% of all registered jobseekers. The number of inactive individuals receiving unemployment benefits rose by 64,175 in 2025 compared to 2024.A Narrative Built on OpticsSpain’s so-called economic miracle appears more like a statistical illusion. Headline GDP growth does not reflect increased productivity per person—indeed, output per capita fell by 1.7% from Q4 2019 to Q4 2025, as the working population expanded by 12.5% while GDP rose just 10.6%. Similarly, unemployment reductions are distorted by the growing number of inactive workers excluded from official counts despite receiving subsidies—a figure that has tripled since 2019.The Sánchez model, critics argue, relies more on presentation than substance: masking real unemployment, inflating GDP through debt, immigration, and European funds, and leaving behind declining net real wages and weak productivity. While headlines may tout Spain as a growth success story, the underlying data suggest mounting vulnerabilities that could surface once debt-driven stimulus fades and the fiscal costs associated with immigration intensify.