Spain | The recovery continues with significant regional differences

Summary

The Spanish economy is expected to grow by around 2.4% annually in 2026 and 2027, although with a heterogeneous regional landscape. Growth will be led by tourism- and service-oriented areas this year, while industrial regions could recover in 2027 thanks to stronger European demand.

Key points

• Key points:
• The Valencian Community will lead growth in 2026 with 3%, driven by reconstruction following the DANA, followed by Madrid (2.7%), and the Balearic and Canary Islands (2.5%).
• At the other end, northern industrial regions will grow below the average in 2026, weighed down by their exposure to energy consumption and international goods trade.
• In 2027, the Canary and Balearic Islands will slow to 2% due to waning momentum in the tourism sector, while the Basque Country, Navarre, and Aragon could rebound to 2.8%.
• Advances in employment and GDP per capita are strongly supported by immigration, although this model shows its limits as productivity in Spain remains stagnant.
• The housing market and congestion in the electricity grid are emerging as significant bottlenecks that constrain development.

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