Spain | Regional Economic Outlook. October 2022

Spain's GDP grew more than anticipated in the first half of 2022. The 2022 revision implies more dynamism in tourism and less in exports of goods and investment in capital goods. The islands remain the main drivers of growth.

Key points

• Key points:
• The Canary Islands (+0.6 pp), the Balearic Islands and the Valencian Community (+0.5 pp) and Catalonia (+0.3 pp) experienced the largest upward revisions. In Madrid (+0.4 pp) the return of urban tourism and a good trend in consumption and exports justify the better prospects. Castilla-La Mancha (for exports, +0.3 pp) and Andalusia (+0.1 point) complete the group of upwardly revised figures.
• Uncertainty limits the advance of investment in capital goods, preventing the improvement from spreading to the northern Autonomous Communities, in which the evolution of goods exports has disappointed in recent months. In addition, the slower-than-expected rate of execution of the NGEU funds and a somewhat less favorable situation slowed down the progress of Asturias, Extremadura and Galicia, whose growth was revised down by -0.1 pp.
• In 2023 the Balearic Islands (-1.2 pp.), Extremadura (-1.1 pp.), C. Valenciana, Murcia, Madrid, Castilla-La Mancha, Canarias and Andalucía (-1.0 pp.) are revised downwards more than Spain (-0.8 pp.). The correction in consumption and investment, linked to worse expectations, higher inflation and interest rates, are slowing down regional growth across the board. The differentiation in the revisions is justified, downwards (greater revisions) mainly due to the different expected behavior of tourism and because a lower dynamism of the NGEU funds is anticipated.
• Cantabria (-0.4 pp.), Aragón and Asturias (-0.5 pp.), Castilla y León and Navarra (-0.6 pp.). As bottlenecks are resolved and if there are no further increases in uncertainty, goods exports should start to accelerate throughout 2023, boosting industrial activity. As a consequence, the CC. AA. from northern Spain could partially offset the above negative factors.

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