Spain's accession to the European Community--now European Union (EU)--in January 1986 required the country to open its economy to trade and investment, modernize its industrial base, improve infrastructure, and revise economic legislation to conform to EU guidelines.

These measures helped the economy grow rapidly over the next two decades. Unemployment fell from 23% in 1986 to a low point of 8% in mid-2007. The adoption of the euro in 2002 greatly reduced interest rates, spurring a housing boom that further fueled growth. The strong euro also encouraged Spanish firms to invest in the United States where several Spanish firms have significant investments in banking, insurance, wind and solar power, biofuels, road construction, food, and other sectors. The end of the housing boom in 2007 and the international financial crisis led to a recession that began in the second quarter of 2008. Housing sales and construction declined dramatically, and the unemployment rate was almost 18% in the third quarter of 2009, one of the highest rates in the European Union.

The economy is expected to shrink by 4% in 2009 and contract by a small amount in 2010 as a whole, although quarterly growth rates are expected to turn positive during the year. Inflation, after peaking at a year-on-year rate of 5.3% in July 2008, fell to negative year-on-year rates for much of 2009 because of the decline in oil prices in the second half of 2008 and reduced domestic spending. It had recovered to low positive rates at the end of 2009. In part because of cautious regulation by the central bank, Spanish banks have few assets based on U.S. mortgages and initially were less affected by the international financial crisis than banks in many European countries. However, banks and especially savings banks have many outstanding loans to troubled construction and real estate companies. Authorities intervened in one savings bank in March 2009 and created a fund to encourage mergers among savings banks. The Zapatero government took a series of measures in late 2008 to support the financial sector and announced 11 billion euros of additional spending, much of it for municipal government public works, in an effort to provide employment and encourage economic activity. In 2009, it announced additional public works spending for 2010. Government spending on public works and unemployment benefits, along with declining revenues, have generated a high budget deficit. However, surpluses for several years before 2008 meant that the government’s debt-to-GDP ratio was low, giving it some room to maneuver.

GDP (2008 est.): $1.556 trillion (seventh-largest Organization for Economic Cooperation and Development--OECD--economy).
Per capita GDP (2008 est.): $33,100.
GDP annual growth rate (INE, third quarter 2009): -4.0%.
Natural resources: Coal, lignite, iron ore, uranium, mercury, pyrites, fluorspar, gypsum, zinc, lead, tungsten, copper, kaolin, hydroelectric power.
Agriculture and fisheries (2.4% of GDP, 2009 est.): Products--grains, vegetables, citrus and deciduous fruits, wine, olives and olive oil, sunflowers, livestock and poultry, dairy products, seafood.
Industry (11.9% of GDP, 2009 est.): Types--processed foods, textiles, footwear, petrochemicals, steel, automobiles, consumer goods, electronics.
Trade (2009 est.): Exports--$206 billion: automobiles, fruits, minerals, metals, clothing, footwear, textiles. Major markets--EU 69%, U.S. 4%. Imports--$298 billion: petroleum, oilseeds, aircraft, grains, chemicals, machinery, transportation equipment, fish, consumer goods. Major sources--EU 58%, U.S. 3%.
Average exchange rate (2009 est.): 1 euro=U.S. $1.40.