Spain | Services continue to shape regional growth

Summary

In 2024, the Spanish economy showed positive dynamics driven by domestic consumption and tourism, which also introduced heterogeneity in regional developments. As a result, Mediterranean regions and the islands were generally the ones leading growth once again last year.

Key points

• Key points:
• BBVA Research’s forecasts for 2025 and 2026 point to a slowdown, given the expected performance of industry, coupled with external risks on international trade, doubts over whether the tourism sector can continue growing, and over Spain’s ability to reduce its public deficit to honor its commitments with Brussels.
• The Balearic Islands, the Canary Islands, Madrid and Catalonia were the autonomous regions that led the GDP growth in 2024. Meanwhile, Murcia, Andalusia and Castilla-La Mancha also made their way into the group of regions reporting growth of above 3.0%.
• A quieter performance in terms of exports, limited by the weakness of the large European economies, slowed the momentum in Navarre, Aragon and, in particular, the Basque Country.
• Last but not least, the devastating flash floods that struck the Valencian Community in late October —apart from causing a tragic loss of human life— also caused damage to physical capital amounting to more than 1% of Spanish GDP, according to BBVA Research.
• Aside from the exception of the Valencian Community, the healthy state of the tourism industry in late 2024, coupled with interest rate cuts, and an increase in wages and employment will continue to support growth in the Mediterranean and island regions of Spain, although this growth will be somewhat less exuberant than in previous years.

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