The Valencia Community is set to see its GDP rise by 3.2% this year, even after the Dana weather event that affected the region. This pace places Valencia among the strongest performers in Spain, according to BBVA Research’s regional observatory published this week. Across the country, the two archipelagos, the Mediterranean provinces, and Madrid are expected to lead growth with annual GDP gains ranging from 3.4% down to 2.8%, in line with the national average.
Regional Growth by Area
Balearic Islands are projected to grow 3.4% in 2025, ahead of the Valencia Community and the Canary Islands at 3.2%, with Catalonia and Andalusia close behind at 3.0%. Murcia follows at 2.9% and Madrid at 2.8%, placing them just above the average and ahead of Castile-La Mancha, which also sits at 2.8%. The ensuing group includes Navarra and La Rioja at 2.7%, Extremadura and Galicia at 2.6%, the Basque Country at 2.5%, Aragon at 2.4%, Cantabria and Asturias at 2.3%, and Castile and León at 2.2%.
According to the BBVA analysis, the gains in competitiveness and the growth in immigration will help sustain tourism expansion and lift GDP in the Canary Islands, Balearic Islands, Catalonia, and Madrid, while private consumption and the fading effects of drought will support activity in Andalusia, Murcia, and Castile-La Mancha. In contrast, the weaker weight of services, softer exports of goods while awaiting changes in European fiscal policy, and ongoing fiscal consolidation weigh on the northern regions and Extremadura, with growth rates described as solid but below the national average.
Impact of the Dana
A section dedicated to the October flood discusses how the magnitude of resources announced to aid the most affected households and businesses, and the speed of delivery, will bolster domestic demand in the Valencia Community. The employment rebound there is already more vigorous and faster than initially expected.
Looking ahead to 2026, the expected slowing of foreign demand’s contribution and a softer expansion of public spending could weigh on the island communities (Canary Islands at about 1.7% and Balearic Islands around 1.6%), as well as Catalonia at 1.6%, and Extremadura at approximately 1.5%, with Andalusia and Murcia around 1.6% due to fiscal consolidation. By contrast, the Valencia Community is forecast to lead growth next year, with about 2.7%, thanks to measures supporting those affected by the floods.