Until 1975, under the Franco regime, the Spanish economy developed almost in isolation, protected from foreign competition by tight import controls and high tariffs, and gradually evolved from an essentially agrarian economy to an industrial one. Spain joined the (then) European Community in 1986. The transition, which was expected to be very difficult, passed off remarkably well and the Spanish economy now ranks eighth in the world by output. Despite the decline of many of its traditional industries, such as shipbuilding, steel and textiles, Spain achieved the highest average growth rate in the Community during the 1980s and a steady performance throughout the 1990s. This was largely due to the growth of its service sector, which now accounts for two-thirds of economic output.
The only significant legacy of structural weaknesses in the Spanish economy which has not been fully tackled is unemployment, which remains stubbornly high at 11 per cent of the workforce in 2004. However, other economic indicators - such as interest rates and budget deficit - are within the limits that allowed Spain to join the European Monetary Union at the start of 1999. In common with most of its EU partners, the Spanish economy has slowed somewhat since 2000, although annual GDP growth increased in 2004 to 3 per cent.
The agricultural sector produces cereals, vegetables, citrus fruit, olive oil and wine. The processed foods industry has also expanded rapidly. The fishing fleet, although reduced from its peak of a few decades ago, remains one of the world’s largest. The relative importance of the agriculture, forestry and fisheries sectors has declined over the last decade and now accounts for less than 4 per cent of GDP. Energy requirements are met by indigenous coal and natural gas, imported oil (mostly from north Africa), and a sizeable nuclear power program. In the manufacturing sector, the decline of older industries has been offset by rapid expansion in chemicals, electronics, information technology and industrial design. Spain has also become an important producer of motor vehicles; this industry alone accounts for 5 per cent of GDP and 80 per cent of all output is exported. In the service sector, Spain has a vast tourism industry mainly servicing visitors from northern Europe: in 2002, this brought an estimated $40 billion (about 7 per cent of GDP) into the economy. Financial services, transport, media and telecommunications have also undergone substantial growth. The EU countries, the USA and Japan are the country’s main trading partners.