Rising Business Bankruptcies Cast Shadow Over Spain's Economic Growth in 2025

Spain's economy is projected to grow by 2.9% in 2025, leading Europe in economic expansion according to European Commission forecasts. However, despite this strong macroeconomic outlook, the country is witnessing a sharp increase in business bankruptcies. In the first three quarters of 2025, bankruptcies surged by 44.4% year-on-year, with over 40,000 business closures compared to 27,700 in the same period of 2024. This paradox highlights the fragility of many companies amid changing economic conditions.

A major contributor to this rise is the prevalence of 'zombie companies'—businesses that had survived through pandemic aid and low-interest rates but are now failing as support ends and borrowing costs rise. A report by Coface identified 35,685 such zombie companies in Spain, predominantly microenterprises, especially in sectors like hospitality and construction, which have become unprofitable.

Additionally, recent changes to Spain's bankruptcy laws, introducing new preventive restructuring mechanisms, have led to an increase in recorded insolvencies, complicating direct comparisons with previous years. Analysts warn of a potential second wave of bankruptcies driven by challenges related to the adoption of AI and digital transformation, which could disproportionately impact companies unable to adapt.

This situation underscores a complex economic landscape where Spain's robust overall growth coexists with significant business distress, emphasizing the need for targeted support and modernization to sustain long-term economic health.