On 20 March 2025, CEO Gerald Baal joined BNR News Radio to discuss the key drivers of economic growth in Spain and Portugal, shedding light on the factors fueling their impressive performance.

Spain’s Key Growth Drivers:
Spain’s economy has demonstrated robust recovery in recent years. In 2024, GDP growth reached 3.2%, with projections stabilizing around 2.7-3% through 2026. A major driver of this growth is the tourism sector, which continues to thrive, drawing 94 million visitors in 2024. This influx has fueled job creation in hospitality and transportation. Additionally, Spain’s leadership in renewable energy plays a crucial role in its economic performance, particularly with a strong focus on solar and wind power. The country is the second-largest producer of renewable energy in the EU, positioning itself as a key player in Europe’s green energy transition. Furthermore, technology and financial services have seen significant growth, supported by EU recovery funds, further boosting the economy.

Portugal’s Key Growth Drivers:
Portugal has also experienced steady economic growth, with GDP growth projected at 1.7% in 2024. Tourism remains a cornerstone of the Portuguese economy, with 18 million visitors expected in 2024, contributing €44 billion to the GDP. The service sector, particularly in cities like Lisbon, Porto, and the Algarve, continues to drive much of the economic activity. Another vital sector for Portugal is renewable energy, where it leads in Europe with 71% of its energy generated from renewable sources in 2024. The country has made substantial investments in solar and wind power, ensuring long-term sustainability and energy security.

Why Are Spain and Portugal Growing Faster Than Other European Nations?

The economic expansion of Spain and Portugal has outpaced many of their European counterparts, driven by a unique combination of structural advantages, government support, and market dynamics.

Tourism Rebound & Post-COVID Recovery

One of the biggest contributors to their growth has been tourism. As two of Europe’s most visited countries, Spain and Portugal were severely impacted by the COVID-19 pandemic, with lockdowns and travel restrictions bringing their economies to a standstill. However, this also meant that once travel resumed, the rebound effect was stronger than in other economies. The delayed recovery sparked an economic surge, with Spain’s tourism sector playing a significant role in the Eurozone’s overall growth in 2024. Portugal also saw record-breaking tourism revenues, with visitor numbers surpassing pre-pandemic levels.

Renewable Energy Leadership

Both Spain and Portugal are at the forefront of Europe’s green energy transition. Spain boasts the second-largest renewable energy infrastructure in the EU, while Portugal generates 71% of its electricity from renewable sources. Their focus on solar and wind power has not only ensured energy security but has also attracted significant investment in green technology and infrastructure, providing a long-term economic boost.

Government & EU Investments

Both countries have received substantial funding from the EU’s Next Generation Recovery Plan, which has been channeled into infrastructure, digitalization, and sustainable energy projects. These investments have modernized key sectors, boosted employment, and created new business opportunities, accelerating economic growth beyond the European average.

Positive Migration Trends & Workforce Growth

Another key factor driving growth is net migration. Unlike other European nations facing workforce shortages, Spain and Portugal have benefited from an influx of foreign workers filling essential roles in healthcare, construction, and services. In Spain, nearly 90% of new jobs in recent years have been filled by immigrants or individuals with dual nationality, ensuring economic expansion and labor market resilience. (See image below on Spain’s net migration rate.)

EU Market Integration & Export Growth

Both countries have successfully leveraged their EU membership to expand trade and attract foreign investment. With strong export-driven industries and increasing demand for Iberian goods and services, their economies have remained competitive, reinforcing their position as key players in European trade.

Spain and Portugal’s rapid growth is a result of a combination of a strong tourism resurgence, renewable energy leadership, government investment, workforce expansion, and EU trade integration. This unique mix has positioned them as two of the fastest-growing economies in the region. (See the Eurozone GDP growth forecast chart below for comparison.)

Market Opportunities in Spain and Portugal

Spain and Portugal offer a wealth of market opportunities, driven by economic expansion, strong tourism recovery, and growing investments in sustainability and technology. Key sectors present significant potential for businesses and investors looking to capitalize on these trends.

Consumer Products

Both Spain and Portugal are witnessing increasing demand for consumer goods, fueled by tourism and shifting consumer behaviors. Spain’s large domestic market presents significant opportunities for food, beverages, and luxury goods, while Portugal’s growing international outlook allows businesses to expand globally. The rise of premium and sustainable products is particularly notable, as consumers become more conscious of ethical sourcing and environmental impact.

Technology & Innovation

Lisbon and Porto are rapidly emerging as major European tech hubs, attracting startups and investment in AI, fintech, and cybersecurity. Spain, with Barcelona and Madrid leading the way, is experiencing similar growth, supported by EU recovery funds and digital transformation initiatives. Both countries are positioning themselves alongside major tech hubs like Berlin, Amsterdam, and London, creating opportunities in software development, cloud computing, and blockchain. Government incentives and startup-friendly policies further enhance the business climate for innovation.

Sustainability & Green Energy

Portugal leads in renewable energy, generating 71% of its electricity from sustainable sources in 2024, while Spain continues to expand its solar and wind infrastructure. This transition presents opportunities in clean energy technologies, electric vehicle infrastructure, and sustainable construction. With EU support and national sustainability goals, businesses focused on green innovation are well-positioned to thrive.

Real Estate & Tourism

The real estate boom in Lisbon, Porto, Algarve, and Alentejo, as well as in Spain’s tourism-driven regions, provides investment opportunities in short-term rentals, hospitality, and commercial properties. However, the surge in Airbnb listings has sparked backlash from locals, driving housing prices and rents higher, leading to new regulations. Despite this, demand remains strong for properties catering to tourism and expatriate communities.

Tourism & Hospitality

Tourism remains a cornerstone of both economies. With record-breaking visitor numbers, there is growing demand for hotels, short-term rentals, and tourism services, particularly in regions like Barcelona, Madrid, Lisbon, and the Algarve. Investments in high-end travel experiences, cultural tourism, and digital booking platforms offer lucrative opportunities. Sustainable tourism initiatives, aimed at balancing economic benefits with environmental protection, are also gaining traction.

Beyond Economics: Cultural Aspects of Doing Business in Spain and Portugal

Economic success is influenced not only by structural advantages but also by cultural factors that shape business practices. As noted by Gerald Baal, CEO of Transfer. LC, in his radio appearance on February 13 *,  understanding these cultural nuances is crucial for companies aiming to expand or build partnerships in Spain and Portugal.

Spain: Relationship-Driven Business Culture

In Spain, business is driven by personal relationships and trust. Face-to-face meetings are prioritized, and negotiations often take longer due to the emphasis on building rapport. The business culture is hierarchical but allows for flexibility and informal negotiations. Spain’s work culture is relaxed yet productive, with long lunch breaks and late working hours common. Interpersonal connections and teamwork are central to business success.

Portugal: Stability and Pragmatism in Business

Portugal is known for its stable and pragmatic business environment. Portuguese professionals value reliability, long-term planning, and structured negotiations. While relationships are important, decisions are often made based on clear data and regulations. Portuguese businesses are more risk-averse compared to Spain, favoring gradual expansion and well-considered investments. Communication tends to be formal, with a growing trend of innovation among younger entrepreneurs.

Key Differences Between Spain and Portugal

1. Hierarchy and Decision-Making: Both countries have moderate scores on Hofstede’s Power Distance Index, indicating a balance between hierarchy and collaboration. However, Spain tends to be more inclusive in decision-making, whereas Portugal relies more on top-down structures.

2. Communication Style: Spain favors direct and expressive communication, valuing relationship-building, while Portugal’s communication is more formal and reserved, emphasizing etiquette and structure.

3. International Orientation: Portuguese companies are more internationally oriented due to a smaller domestic market, whereas Spain’s large market often leads to a more inward-focused approach.

4. English Proficiency: Portugal generally has a higher level of English proficiency, facilitating smoother international business interactions compared to Spain.

5. Risk Tolerance: Spain has a higher tolerance for risk, embracing innovation and quick decisions. Portugal, in contrast, is more cautious, with decisions based on thorough analysis.

These cultural distinctions, along with factors like labor market flexibility, regulatory environments, and networking dynamics, shape the business landscapes in both countries. Understanding these differences is crucial for successful international engagement.

References

• AlphaTrad. (n.d.). Cultural differences between Spain and Portugal. Retrieved from https://www.alphatrad.co.uk/news/cultural-differences-spain-portugal
• BBC. (2025). Spain economy booming due to migration and GDP growth. Retrieved from https://www.bbc.com/news/articles/c5y7jmlyx02o
• Economy and Finance – European Commission. (n.d.). Economic forecast – Portugal. Retrieved from https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/portugal/economic-forecast-portugal_en
• Economy and Finance – European Commission. (n.d.). Economic forecast – Spain. Retrieved from https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/spain/economic-forecast-spain_en
• Guardian, The. (2025). Spain economy booming thanks to migration and GDP growth. Retrieved from https://www.theguardian.com/commentisfree/2025/feb/19/spain-economy-booming-migration-gdp-growth
• Live World Tourism Forum. (2023). Travel and Tourism: A key driver of Europe’s economy in 2023 and 2024. Retrieved from https://live.worldtourismforum.net/news/risk-radar/Travel-and-Tourism-A-Key-Driver-of-Europe%E2%80%99s-Economy-in-2023-and-2024
• Macrotrends. (n.d.). Spain net migration statistics. Retrieved from https://www.macrotrends.net/global-metrics/countries/ESP/spain/net-migration#google_vignette
• Oxford Economics. (2025). Spain and Portugal will continue to shine this year. Retrieved from https://www.oxfordeconomics.com/resource/spain-and-portugal-will-continue-to-shine-this-year/
• Portugal Global. (2024). Portugal’s renewables meet 71% of power demand in 2024. Retrieved from https://www.portugalglobal.pt/en/news/2025/january/portugals-renewables-meet-71-of-power-demand-in-2024/#:~:text=Portugal’s%20national%20grid%20operator%20Redes,28%25%20of%20the%20overall%20demand.
• Portugal Resident. (2025). Iberian Miracle amazes Europe: Spain and Portugal become engine of eurozone economy. Retrieved from https://www.portugalresident.com/iberian-miracle-amazes-europe-spain-and-portugal-become-engine-of-eurozone-economy/#:~:text=Year%2Don%2Dyear%2C%20Spain,0.3815%20and%20Portugal%200.0459%20points.
• REE. (2022). Spain was the European country that generated the second highest amount of electricity with wind and solar power. Retrieved from https://www.ree.es/en/press-office/news/press-release/2022/07/2021-spain-was-european-country-generated-second-highest-amount-electricity-with-wind-solar-power#:~:text=In%202021%2C%20according%20to%20ENTSO,)%2C%20second%20only%20to%20Germany.
• Statista. (2024). Number of international visitors and overnight stays in Portugal. Retrieved from https://www.statista.com/statistics/398360/number-of-international-visitors-and-overnight-stays-in-portugal/