Spain's economy grew by 3.2% in 2024, surpassing official forecasts and significantly outperforming other eurozone countries, according to preliminary data from the National Statistics Institute released on Wednesday.

The Spanish government plans to upwardly revise its growth forecast for the year from 2.4% following this stronger-than-anticipated performance, which was driven by a surge in tourism, robust agricultural output, and increased exports.

Economic growth is expected to stay strong this year and next, driven by consumer spending, falling unemployment, and a rise in investment, according to Jefferies in an investor note.

Immigration, which has helped fill skill gaps and contributed to a decrease in the unemployment rate to its lowest level in 16 years during the fourth quarter, has also supported GDP growth.

“This momentum has been based on three main drivers: private consumption, record tourism and strong job creation, mostly thanks to immigration,” said Javier Molina, Senior Analyst for eToro.

However, despite the growth, the rising cost of living and a housing crisis that has driven prices up in major cities have hurt living standards, according to Natalia Aguirre, head of strategy at Renta 4 brokerage, in an interview with Reuters, who predicts a slowdown in private consumption.

Molina also warned that slow growth among Spain's European neighbours could eventually impact Spanish exports.

“If the European economy does not improve, it could weigh on Spain in 2025,” he said.

The country's economy grew by 0.8% in the final quarter of the year compared to the previous quarter. Analysts surveyed by Reuters had forecast a 0.6% quarter-on-quarter growth.

The full-year growth rate exceeded both the government's 2.7% forecast and the central bank's 3.1% forecast.

“Spain keeps leading the eurozone growth, with a GDP increase four times higher than the eurozone as a whole,” said Economy minister Carlos Cuerpo.

France and Germany have revised their growth forecasts for this year to 0.9% and 0.3%, respectively, while Italy anticipates a 1.2% expansion.

According to Jefferies, Spain’s fiscal position is stronger than its counterparts, making it less vulnerable to potential trade tariffs from US President Donald Trump.

Furthermore, the budget deficit is expected to decline this year and next, driven by higher taxes and cuts in subsidies, such as the reduction on electricity. Spain aims to lower its budget deficit to 2.5% this year.