THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Spain

Ranked 21st of 149

At a glance

Ranks

21 st on the Legatum
Prosperity Index™

38th
42nd
35th
22nd
17th
15th
16th
29th
15th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Spain performs best on Safety & Security and Natural Environment and scores lowest on the Business Environment sub-index.

Visit our Rankings table to see how Spain compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Spain maintains its ‘prosperity surplus,’ delivering more prosperity than expected given its wealth, but has seen surpluses in both Economic Quality and Business Environment turn into deficits following its largely unresolved economic crisis.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Despite a sharp drop in Economic Quality, Spain maintains its overall Prosperity.
Despite a sharp drop in Economic Quality, Spain maintains its overall Prosperity.

Spain’s housing and deep debt crisis after the 2008 global financial crisis has, unsurprisingly, had an effect on its performance in Economic Quality. Spain has fallen 17 ranks to 38th in Economic Quality over the past decade, having been overtaking by several fast-growing Eastern European and Southeast Asian ‘tigers.’ Soaring unemployment following the crisis is major factor here: Spain’s unemployment grew from 8.4 percent to 26.3 percent between 2007 and 2013, particularly affecting younger people. The latest unemployment rate for Q3 2016 has seen it dip back below 20 percent – a near seven-year low –as the economy returns to growth.

It is important to note the presence of a large shadow economy, a trait that Spain shares with Balkan states, such as Macedonia and Serbia, which also have high unemployment rates. Spain has long suffered from relatively high unemployment rates also because of structural issues: the economy relies heavily on tourism and construction, but not industry, so it lags behind its larger European peers in this respect. It is crucial that Spain continues to build employment opportunities and invests in innovation to unlock greater economic opportunity.

In the Business Environment sub-index, Spain’s performance has fallen slightly but improvements elsewhere in the world has seen it fall 18 ranks to 42nd over the past decade after being overtaken by peers from neighbouring Portugal to Eastern European states such as Romania, Poland, Latvia, and the Czech Republic. While these states have determinedly pushed through market reforms to improve the business climate and boost competitiveness, Spain is constrained by political inaction. It is still relatively difficult to resolve insolvency and intellectual property protection remains the second lowest in the OECD. Hiring and firing practices are below OECD averages and less flexible than in much of Eastern Europe, though this somewhat expected given Spain’s stronger welfare policies.

Governance is another cause for concern: Spain has fallen ten ranks to 35th and has now been overtaken in the Governance sub-index by South Africa, Botswana, and Namibia. Governance in these African states has also declined, but not the same extent. The Prosperity Index reports that in 2016, there is greater judicial independence and government transparency in these countries than in Spain, even though it is the most democratic. Confidence in the national government has declined by 20 percentage points over the past decade: only 28 percent of Spanish people responded positively when polled. In Botswana, by contrast, 82 percent claimed to have confidence in their national government. The Prosperity Index also notes a growing perception of corruption in Spain, which is problematic as it erodes trust in institutions and is damaging for civil society. This poor performance in Governance is, perhaps, not surprising given Spain’s recent economic turmoil and political instability: it has been without a functioning government for ten months after elections in late 2015 failed to produce a clear majority.

Spain falls behind in Governance to some surprising peers.
Spain falls behind in Governance to some surprising peers.

Spain does have some fundamentally strong foundations of prosperity that have stopped it falling further. It performs strongly in Personal Freedom where it ranks 16th, though it has fallen from 5th since 2007. However, this is mainly the result of improvements elsewhere rather than Spanish decline. 84 percent of those polled replied that they believed their area was a good place for immigrants, the fifth highest in the OECD. 87 percent responded similarly for the LGBT community and Spain was the third country in the world to legalise same-sex marriage nationwide in 2005. In Social Capital, Spain ranks 29th, performing at the OECD average and above the EU average. The Prosperity Index captures Spain as country with strong social networks and family ties: 96 percent say they feel they can rely on family or friends to help them in times of need, the third highest in the OECD along with Denmark. Strong social ties are important for prosperity, particularly in times of economic turmoil, but also to boost self-worth and limit feelings of isolation. It is from these foundations that future Spanish prosperity can grow.

Spain is in the top five for tolerance towards immigrants in the OECD.
Spain is in the top five for tolerance towards immigrants in the OECD.

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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

Spain’s prosperity surplus has declined slightly along with Spain’s GDP per Capita since the economic crisis. It is notable that it has not declined further despite a lower GDP and ongoing economic and political turmoil. Decline in the Economic Quality and Business Environment sub-indices mean that Spain is now under delivering here, while poor performance in Governance sees the country edge closer to a deficit there as well. However, this is offset by improvements in the Health, Safety & Security, Social Capital, and Natural Environment sub-indices in which Spain has seen its surpluses grow over the past decade.

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Areas of Success
Areas of Success

Safety & Security has been an area of success for Spain over the past decade: it has risen 14 ranks to 15th. More and more people feel safe walking alone at night and there was an overall decrease in homicides, road deaths, and terrorist attacks. In the Natural Environment sub-index, Spain moved up nine places to rank 15th also. The country has generally low pollution levels with only 0.5 percent of the population living in areas exposed to air pollution above WHO levels. Spain has also increased the conservation of its land and marine areas. Spain performs well in both Personal Freedom – where tolerance and liberties are high – and in Social Capital, where family and friendship networks are strong.

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Areas of Little Change
Areas of Little Change

Education and Health are two sub-indices which have seen very little change over the past decade. In Education, Spain moved up one rank to 22nd. Its educational quality (PISA) score is below the OECD average and its education system could benefit from a greater focus on vocational qualifications, which is particularly relevant given Spain’s youth unemployment. Only 16.6 percent of workers have secondary vocational education, which is below the OECD average of 25.7 percent. Portugal and Italy, by contrast, have 27.5 percent and 36 percent, respectively. In Health, Spain ranks 17th. Satisfaction with the quality of healthcare available has declined in recent years, perhaps a reflection of necessary austerity and reform measures meant to increase efficiency in the sector.

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Areas of Improvement
Areas of Improvement

Improvement is needed in Governance, Business Environment, and Economic Quality. It is important for political gridlock to be resolved: this would naturally increase government effectiveness and would, hopefully, boost the public’s confidence in the government. Low judicial independence is also a cause for concern: it is the 4th lowest of the OECD, ahead of only Mexico, Turkey and Slovakia. Given Spain’s economic crisis, it is unsurprising that performance in Economic Quality dropped. It is positive that in recent years, Spain’s high unemployment rate has dropped, but it is still hampering its delivery of prosperity, particularly for the country’s youth. Spain’s GDP growth has risen in recent years, which is positive, but it is important that Spain works to diversify its economy to bring in new revenue streams and the potential employment opportunities that would complement this. To achieve this, Spain’s Business Environment needs to be more flexible and competitive to encourage investment and make it easier for people to start new businesses.