Spain - Economic development
After 1939, Spanish economic policy was characterized by the attempt to achieve economic self-sufficiency. This policy, largely imposed by Spain's position during World War II and the isolation to which Spain was subjected in the decade following 1945, was also favored by many Spanish political and business leaders. In 1959, following two decades of little or no overall growth, the Spanish government, acceding to reforms suggested by the International Monetary Fund (IMF), OECD, and IBRD and encouraged by the promise of foreign financial assistance, announced its acceptance of the so-called Stabilization Plan, intended to curb domestic inflation and adverse foreign payment balances.
Long-range planning began with Spain's first four-year development plan (1964–67), providing a total investment of P 355 billion. The second four-year plan (1968–71) called for an investment of P 553 billion, with an average annual growth of 5.5% in GNP. The third plan (1972–75) called for investments of P 871 billion; drastic readjustments had to be made in 1975 to compensate for an economic slump brought on by increased petroleum costs, a tourist slowdown, and a surge in imports. A fifth plan (1976–79) focused on development of energy resources, with investments to increase annually by 9% increments. A stabilization program introduced in 1977 included devaluation of the peseta and tightening of monetary policy. The economic plan of 1979–82 committed Spain to a market economy and rejected protectionism.
Accession to the EU generated increased foreign investment but also turned Spain's former trade surplus with the EU into a growing deficit: the lowering of tariffs boosted imports, but exports did not keep pace. The government responded by pursuing market liberalization and deregulation, in hopes of boosting productivity and efficiency to respond to EU competition. A number of projects, such as the construction of airports, highways, and a high-speed rail line between Madrid and Seville, received EU funding. To prepare Spain for European economic and monetary union, the government in 1992 planned to cut public spending. The currency was devalued three times in 1992–93. Additionally, Spain has been a principal beneficiary of the EU's "harmonization fund." This fund provides financial support to poorer EU nations to attempt to reduce the disparities in economic development.
After an economic downturn in the early and mid-1990s, the Spanish economy turned around to register a new dynamism characterized by strong growth rates and a rise in foreign investment sparked by increased liberalization. Moreover, unemployment dropped and inflation remained in check. Spain capped its success by entering the European Monetary Union (EMU) in 1999. Reducing the public sector deficit, decreasing unemployment, reforming labor laws and investment regulations, lowering inflation, and raising per capita gross domestic product (GDP) were all goals in the early 2000s. Economic growth was forecast at 1.8% in 2003, the highest of all the large EU economies. The construction sector was thriving in 2002, driven by higher levels of investment and public infrastructure projects.