The latest economic report from BBVA Research suggests that the Balearics and the Canaries will lead regional growth this year and in 2022 thanks to the recovery of tourism. At present, this recovery is particularly pronounced at a national level, with the boost from foreign tourism predicted to be far stronger next year.
Based on information up to mid-summer, BBVA say that the Balearics and the Canaries will have growth this year of 8.3% and 6.9% respectively, although in part this is a reflection of the falls that they sustained last year.
Domestic consumption is expected to accelerate growth in other regions, with 6.7% forecast for both Andalusia and Valencia.
For 2022, the analysis indicates that Spain's GDP growth forecast remains at 7% and that the recovery in foreign tourism will continue to be the key to supporting double-digit GDP increases in the Balearics (up to 11.6%) and the Canaries (10.7%).
BBVA point to two key variables that will influence growth forecasts. The first concerns the control of the pandemic and its effectiveness. Without new ups and downs and limitations to activity, confidence will improve and could result in higher than expected growth.
The other relates to doubts regarding the implementation and effectiveness of distribution of EU Next Generation Funds. The Spanish government's Recovery, Transformation and Resilience Plan "seems sufficient and ambitious in terms of diagnosis, implementation and amount, but there are still some doubts as to whether the necessary reforms will be implemented in the next years".
Separate to the BBVA Research, concerns are being raised regarding the potentially negative impact of the rises in the price of electricity and fuel. The professor of applied economics at the University of the Balearic Islands and managing director of the Fundación Impulsa, Antoni Riera, says that economic recovery depends mainly on the cost of debt, and "an increase in inflation would cause an increase in the cost of debt". An objective of macroeconomic policy, he adds, should be to maintain inflation close to 2%.