Spain’s Regional Economic Outlook for the Fourth Quarter of 2024: Analysis by BBVA Research

In 2024, Spain’s economic growth has been revised upward due to increased domestic consumption and tourism. The country has benefited from the end of a drought, improved European economic conditions, and reduced interest rates, factors that have helped sustain growth despite challenges like the impact of extreme weather events and potential changes in US trade policies.

Key factors driving economic growth in different regions of Spain include their exposure to service exports, particularly in tourism and hospitality sectors. This has led to varied growth forecasts for different regions, with the Canary Islands and the Balearic Islands showing strong economic momentum, while Madrid and Catalonia are growing in line with the national average. In 2025, southern Spain is expected to experience growth due to agricultural production and increased private and public consumption.

However, challenges loom on the horizon for Spain’s economy. Potential tariff changes, troubles in the automobile sector, and slow growth in the eurozone are factors that could lead to downward revisions in growth forecasts for industrial and exporting regions in 2025. The slowdown is expected to continue into 2026, particularly affecting regions like the Mediterranean and the islands due to factors such as tourism reaching saturation, normalized growth levels in agriculture, and fiscal constraints limiting public spending.

On the other hand, northern regions are expected to see more support for growth due to lower interest rates, European funds, the need to update equipment, and increased demand in Europe. Additionally, the modernization of productive capital and incoming aid will continue to drive growth in regions like the Valencian Community.

Overall, Spain’s economic outlook for the coming years will be shaped by a combination of domestic and international factors. While certain regions may face challenges due to specific industries or external conditions, others will benefit from factors like increased demand, financial support, and infrastructure investments. As the country navigates these complexities, continued monitoring and adaptation to changing circumstances will be crucial for sustaining economic growth and stability across its diverse regions.