After achieving a 5.5% expansion in 2022, the Spanish economy is projected to stall in 2023, with a modest growth rate around 1.3%, according to revised forecasts from Funcas, the Savings Banks Foundation. In the report Economic projections 2023 for autonomous communities published this Monday, the expected growth rates show the Balearic Islands leading with 3.3% and the Canary Islands close behind at 2.2%. Other regions such as Catalonia, Madrid, Navarra and the Basque Country are anticipated to grow slightly above the average, around 1.4%.
Funcas economists indicate that by the end of 2023 the overall Spanish economy and ten autonomous communities will have recovered to pre pandemic levels seen in 2019 after the sharp downturn of 2020. Castilla-La Mancha, Navarra, Murcia, Aragon and Galicia have already surpassed that benchmark in 2022. Looking ahead, Catalonia, Extremadura, Castilla y León, Cantabria, Asturias, Balearic and Canary Islands are expected to reach 2019 levels in 2024. By year-end 2023, Catalonia is forecast to remain 0.9 points below its pre pandemic level, while Madrid is projected to be 0.5 points above the 2019 level.
The Funcas report, presented in Vigo by the managing director and the organization’s Director of Economic Affairs and Statistics, highlights the Balearic and Canary Islands as the fastest growing communities in 2022, with growth rates of 12% and 10% respectively. The year 2022 is described as a rebound year with regional variations that are pronounced and meaningful. Different regions show a clearly productive pattern. Castile and Leon posted 3.1% growth, Cantabria 3.9% and Extremadura 4%. In Catalonia, GDP rose 5.4%, just a tenth below the national average of 5.5%.
Tourism and European funds
A slowdown is projected for 2023 across autonomous communities. The reduced pace is mainly tied to weaker household consumption, elevated inflation and higher interest rates. In this scenario, the main growth engine is expected to come from European funds and the return to normal levels in tourism activity.
Tourism should remain especially attractive for the Balearic and Canary Islands, with Andalusia and Galicia also contributing to the rebound. In terms of European funds, the report notes that the regions with strong assets in capital goods industries and firm level services stand to gain the most: Catalonia, Madrid, Navarra and the Basque Country. The analysis emphasizes that the difference lies not in the regional distribution of funds but in how effectively each region uses these stimuli within its business framework. It also flags that Castile and Leon and the Valencian Community could benefit from an upswing in the automobile sector.
Unemployment rate
The unemployment rate is expected to fall across the board, though Madrid and Navarra may still sit above their pre pandemic levels. On average, the unemployment rate would move from about 12.9% in 2022 to roughly 12.3% in 2023. Regions such as the Basque Country, Balearic Islands and Navarra are anticipated to report lower rates around 8% to 9%. Aragon and La Rioja are projected to hover near 9.2%, with Catalonia, Castilla y León and Cantabria around 9.3%. Madrid is forecast to see an unemployment rate near 11% in 2023.