BBVA Research has increased its growth forecast for 2023 for the Valencian Community by a small margin, predicting a 4.3 percent rise in GDP this year and a steady 1 percent in 2024. This uptick reflects a slightly rosier view than earlier projections. By 2024, the economic landscape is expected to improve further, with growth reaching about 3.4 percent. The overall outlook suggests tourism may lose some momentum, while industrial regions will lead Spain’s GDP expansion over the next two years, according to BBVA Research.
The latest public report from the bank’s research service notes that Spain’s GDP for 2022 could advance to around 4.6 percent, driven by stronger consumption, investment, and exports in regions such as Madrid, Catalonia, Castilla-La Mancha, and Murcia, along with northern regions like Navarra, Castilla y León, and Galicia. For 2023, the forecast has been revised upward by about two percentage points, projecting Spain’s overall GDP growth of around 1.2 percent as construction and export-oriented communities push ahead. Basque Country, Navarra, and Galicia lead these upward revisions for 2023, with 2024 expected to bring a 3.4 percent expansion fueled by the normalization of European operations and greater use of Next Generation EU funds. The report notes a background of tourism normalization, yet flags that high occupancy from the previous year is already near pre-crisis levels. Tourism spending has risen in the Balearic and Canary Islands, contributing to a modest uptick in those regions, while overall momentum in tourism is anticipated to ease as disposable incomes in source markets remain constrained.
Household spending is under pressure from inflation, uncertainty, and weaker job creation. Still, BBVA POS data show real-term growth in household expenditures across most regions in the final quarter, with notable acceleration in the Balearic Islands and Navarre. Asturias appears in the top tier for spending growth in October and November, while other regions show a more tempered pace. Northern regions lag in absolute activity, with Castilla y León, Cantabria, Galicia, Catalonia, La Rioja, and Aragon showing modest annual gains.
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Employment resilience remains stronger than expected as the year closes, with the Canary Islands and the Community of Madrid standing out, followed by Cantabria, Galicia, and Extremadura, which experienced declines in the prior quarter. Navarra, La Rioja, Castilla-La Mancha, and the Balearic Islands are the only autonomous communities where year-end employment signals worsen. Regional differences show the Canary Islands, Balearic Islands, Madrid, and Catalonia outperforming the national pace of 4.6 percent in 2022, while Castilla y León, Asturias, Aragón, and Cantabria trail the national growth.
With the European economic recovery gaining momentum and energy costs stabilizing, industrial activity and goods exports could lift GDP growth to about 1.2 percent in 2023 despite a sluggish start. Basque Country, Navarra, and Galicia lead the upward revisions, followed by northern regions, Catalonia, and the Valencian Community, aided by smoother European demand, fewer bottlenecks, and reduced uncertainty.
Conversely, the anticipated lower contribution from private consumption and foreign tourism weighs on the national GDP for 2023, prompting downward revisions for the islands, Madrid, the Region of Murcia, Castilla-La Mancha, and Andalusia.
BBVA Research also notes a forecast that Spain’s GDP could rise 5.2 percent in 2022 for the community as a whole. Looking ahead to 2024, continued momentum is expected, underpinned by the Next Generation EU Funds, greater clarity on energy price trajectories, and rising household income. Sectors with major industrial weight should enjoy stronger growth as production bottlenecks ease, while tourism-driven regions may see slower expansion as demand normalizes.
The report highlights several risks for the Spanish economy. Tourism could stall if national competitiveness erodes or if household income declines and consumption shifts fail to materialize. While Spain and Portugal led 2022 price increases in accommodation, the strongest buyers of foreign tourism were the countries with the sharpest price rises. Inflation may stay elevated in the near term, with wages climbing as pre-pandemic purchasing power remains elusive, making the consolidation of income growth a key factor for inflation ahead.
Although the Next Generation EU funds appear to be gaining traction, their full impact will take time to reach households and businesses. Construction demand appears to be picking up in regions such as Castilla-La Mancha, the Community of Valencia, Andalusia, and Catalonia. As fund implementation accelerates, regions with higher public expenditure needs and those supplying investment goods may benefit more.