Iberian economies outperform peers, supported by strong domestic spending and thriving industries.
Spain and Portugal once again stood out among the eurozone’s top-performing economies in the final quarter of 2025.
Both Iberian countries saw their economies expand by 0.8% last quarter — more than double the eurozone’s average growth rate of 0.3% for the same period, according to preliminary estimates from Eurostat.
Spain posted its strongest economic expansion in a year, with gross domestic product rising by 0.8% in the fourth quarter compared to the previous three months.
That was an improvement on the 0.6% growth recorded in the third quarter and came in above estimates of 0.6%.
Spain's economy grew by 2.8% in 2025, a sharp contrast to the eurozone average of 1.5%. It also places the country well ahead of larger peers such as Germany, which expanded by just 0.4%, and France, which recorded annual growth of 1.1%.
Domestic demand was once again the main engine of growth for Madrid.
Household consumption rose by 1.0% during the quarter, contributing significantly to overall growth. Investment also increased by 1.7%, while public spending was broadly stable, up just 0.1%.
Tourism continues to play a key role in supporting Spanish services activity, which grew by 0.8% in the quarter. Construction also made a notable contribution, with output rising by 2.1%. Lower energy prices and easing inflation have helped sustain consumer confidence and encouraged spending.
Portugal also grew by 0.8% in the final quarter, matching its performance from the previous three months and outperforming the market forecast of 0.5%.
On a yearly basis, Portugal’s economy expanded by 1.9% in 2025. While that is slightly lower than the 2.1% recorded in 2024, it remains well above the eurozone average.
However, the composition of growth differed from that of its Iberian neighbour.
Portugal’s economy was lifted mainly by an improvement in the trade balance. A sharp drop in imports, particularly in petroleum products, helped offset weaker domestic demand and gave overall output a positive push.
Growth remains uneven across the eurozone
While Spain and Portugal outperformed, the broader picture across the eurozone remains mixed.
The currency bloc recorded quarterly growth of 0.3% in the final quarter, matching the previous quarter’s result and slightly exceeding expectations of 0.2%.
Among member states with available data, Lithuania recorded the strongest quarterly expansion, rising by 1.7%, followed by Spain and Portugal.
Ireland was the only country to contract by 0.6% on the quarter.
On an annual basis, the euro area economy expanded by 1.5%, up from 0.9% in 2024, but momentum is expected to soften to 1.2% in 2026, according to European Commission projections.
Among major economies, Germany grew by 0.3% quarter-on-quarter, its strongest result in three quarters, as consumer and government spending picked up.
Italy also saw a slight acceleration to 0.3%, while France posted a modest 0.2% increase, weighed down by weaker investment and inventory dynamics.
"Italian GDP growth was lower than that of Spain, in line with that of Germany, and slightly higher than that of France," said Nicola Nobile, chief Italy economist at Oxford Economics, in a note.
"Today's figure, although accelerating compared to the previous quarter, does not change the view of an economy growing in line with its limited potential growth rate," he added.
The broader European Union grew by 0.3% compared to the previous quarter, matching the eurozone’s quarterly performance. On an annual basis, the EU expanded by 1.6%, slightly higher than the currency bloc.
Labour market remains a source of strength
Despite the mixed economic performance, the labour market across the eurozone continues to show signs of improvement.
The unemployment rate fell to 6.2% in December, its lowest level since early 2008. That is down from 6.3% in November and the same month a year earlier.
In the wider European Union, the jobless rate remained steady at 5.9%. Eurostat estimates that 10.8 million people were unemployed in the euro area at the end of the year, down by 61,000 from November.
Youth unemployment also declined slightly. The unemployment rate for people under 25 in the euro area dropped to 14.3% in December, down from 14.4% a month earlier.
