IMF: Spain lags in productivity despite EU funds

Declining Productivity: The Spanish Case Unexplained by the IMF

The International Monetary Fund has quantified the disconnect between received funding and economic results. Spain is the only major eurozone economy experiencing a productivity decline since 2018, with an average drop of one-tenth during the 2018-2027 period, according to estimates released this week in Bangkok. Over the same timeframe, Germany improved by 1%, the Eurozone average rose by half a point, France advanced by 0.3%, and Italy by 0.2%. The uncomfortable detail: Spain was allocated more than €100 billion in European funds from 2021, theoretically destined for economic transformation.

What IMF Data Says About Spain

The institution projects a 1.4% productivity fall in 2025, a year when growth and funds would have suggested the opposite. Positive growth forecasts for 2026 and 2027 (1.0% and 1.2%) do not compensate for the dip. Comparing this to the 2008-2017 period, when Spain recorded a 3.2% improvement, reveals a paradox: the country grew in productivity during the crisis but stagnates in expansion years.

The contrast with European partners is stark. Germany improves by 1%, France by 0.3%, and Italy by 0.2% over the same period. Only Spain shows a negative sign. Economists insist that productivity is the key indicator for raising wages without losing competitiveness and for sustaining pensions.

Labor Costs Rising Faster Than Productivity

Where Spain does lead is in rising labor costs. Unit labor costs have increased by 3.1% since 2018, above the 3% Eurozone average and Germany's rate, and doubling the pace of France and Italy. Projections for 2026 and 2027 maintain this differential: 3.6% annually versus 3.0% and 2.7% for the Eurozone.

The Banco de España and the European Commission reiterate that labor costs must not grow faster than productivity. The International Labour Organization states it plainly: "A wage growth systematically higher than labor productivity growth is unsustainable." The problem is not that wages are rising, but that they rise on a non-growing base.

US Report on Investment Climate

The US State Department published its annual report, citing regulatory hurdles, lack of market unity, and government resistance to paying renewable energy arbitration awards. "It has consistently resisted compliance," the text says. Nevertheless, it considers Spain attractive due to high growth, but summarizes the issues: high tax pressure, rising labor and energy costs, slow bureaucracy, and disparate regional regulations.

Regarding employment, the report acknowledges unemployment has fallen to historic lows but warns that productivity remains weak. More than weak: negative if considering the last eight years, according to the IMF. The circle closes: lower productivity, higher costs, less investment.

The Demographic Background No One Wants to Address

Underlying the data analysis is an issue the report does not address: the composition of the active population. Some argue, without official data, that Spain has received between 560,000 and 700,000 people annually in recent years. The massive influx of labor into low-productivity sectors—hospitality, construction, care—would dilute the average, according to this view. It is not that newcomers are less productive by origin, but that the economic model absorbs them into low-value-added niches.

Some argue that without this worker inflow, the pension system would not be sustainable. The argument has accounting logic: more contributors, more revenue. But it also hides a trap: if those contributors generate little value per hour worked, the contributor-to-pensioner ratio deteriorates long-term. Productivity is not a macroeconomic ornament; it is the foundation of everything.

The Lingering Question

With €100 billion in European funds, an economy growing above average, and a labor market absorbing hundreds of thousands of people annually, productivity should have taken off. It has not. The IMF offers no closed explanation. The US report points to bureaucracy and regulatory fragmentation. Meanwhile, economic policy continues to look the other way.