Spain has traditionally been an agricultural nation and is still one of the largest producers of farm commodities in Western Europe, but since the mid-1950s industrial growth has been rapid. A series of development plans, initiated in 1964, helped the economy to expand, but in the later 1970s an economic slowdown was brought on by rising oil costs and increased imports. consequently, the government emphasized the development of the steel, shipbuilding, textile, and mining industries. Spain derives much income from tourism. The gross domestic product in 1999 was $595.9 billion. The national budget in 1997 included revenues of $160.8 billion and expenditures of $183.8 billion. On January 1, 1986, Spain became a full member of the European Community.

The Spanish economy began to industrialize in the late 18th century, and industrialization and economic growth continued throughout the 19th century. it was limited to a few, comparatively small, areas of the nation, particularly to Catalonia (textiles) and the Basque nation (iron and steel). The overall pace of economic growth was slower than that in the major western European countries, so that by the early 20th century Spain appeared poor and underdeveloped compared with countries such as Great Britain, Germany, France, and even Italy.

Spain's mixed capitalist economy supports a GDP that on a per capita basis is 80% that of the four leading West European economies. Its center-right government successfully worked to gain admission to the first group of countries launching the European single currency on 1 January 1999. The AZNAR administration has continued to advocate liberalization, privatization, and deregulation of the economy and has introduced some tax reforms to that end. Unemployment has been steadily falling under the AZNAR administration but remains the highest in the EU at 14%. The government intends to make further progress in changing labor laws and reforming pension schemes, which are key to the sustainability of both Spain's internal economic advances and its competitiveness in a single currency area. Adjusting to the monetary and other economic policies of an integrated Europe - and further reducing unemployment - will pose challenges to Spain in the next few years.