Spain | Regional growth: war, NGEU funds and tourism

Summary

The potential effects of the war between Russia and Ukraine on Spain's autonomous communities are not uniform — the impact could be worse on the northern regions and less severe on the Levante coast and the islands.

Key points

• Key points:
• Growth could be curbed to some extent in Aragon, Castile and Leon, Cantabria, the Basque Country, Galicia, Asturias and Navarre. These regions use more imported intermediate goods, their output is more energy intensive, their activity is oil-price sensitive and they have a heavier weighting of foreign trade in goods in their GDP.
• In all of them, average annual growth over the two-year period will be slightly below 3%, with downward revisions, on average in both years, of over 1.7pp.
• Situated close to this group of regions, with economic growth of between 3% and 3.5%, are La Rioja, Castile-La Mancha and Murcia, where industrial (or energy in the case of Murcia) and agri-food sector specialization will put a brake on their economies.
• Both the data on Spanish debit and credit card expenditure (which roughly equates to domestic consumption) and those for spending by people in regions other than those where they are resident (which roughly equates to domestic tourism) are likely to have recovered in April — particularly in those autonomous communities which are traditional tourist destinations at Easter.
• The recovery seen in the Balearic Islands, the Community of Valencia and Andalusia, along with the positive performance in the Canary Islands; and the data on vacation reservations or the expenditure via "card not present transactions" with foreign debit and credit cards (also roughly equivalent to vacation reservations), suggests a summer which could outperform the current forecasts for the sector.

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