The countries of southern Europe have been outperforming the rest of the euro area since the end of the Covid pandemic, in part because of the strength of their service industries. Spain has been a standout, distinguished by its higher value-added services sector, and it has growth momentum that is expected to last for several years, according to Goldman Sachs Research.
Our economists have raised their forecasts for Spain and now expect the economy to grow 1.9% in 2026 and 1.7% in 2027 (compared with previous forecasts of 1.5% and 1.6%, respectively). This increases next year’s growth forecast for the entire euro area by 0.1 percentage point to 1.2%.
While the resilience of the services sector has been recognized as a driver of economic growth in southern Europe since the pandemic, observers typically link this solely to tourism-related services. The tourism rebound certainly was pivotal early on, but the composition of services activity in Europe has shifted toward subsectors with more value added per employee—including finance, real estate, information and communications technology, and professional services. This trend has been particularly notable in Spain.
“The shift toward high value-added services is the least appreciated structural change of the Spanish economy in our conversations with investors,” Filippo Taddei, senior economist focusing on southern Europe and European policy within the European Economics team, writes in the team’s report. The share of high value-added services in Spain’s GDP is now 3 percentage points higher than it was pre-pandemic and has increased by 1 percentage point more than in the rest of the euro area.