Coward The autonomous communities of the Canary Islands, the Balearic Islands, and the community will lead the GDP growth this year in 2025, with an economic evolution exceeding 3%, according to the forecasts published this week by BBVA Research. The forecast for La Rioja is 2.7%, three tenths below the average and 1.8% in 2026.
In its latest «Regional Observatory,» corresponding to March, BBVA’s Research Service has revised the growth estimates for 2025 in almost all autonomous communities, considering that the entity’s perspective for overall GDP growth is 2.8%.
According to their predictions, at the regional level, tourism will continue to support growth in the island communities. Specifically, there will be an increase in the GDP in the Canary Islands by 3.4% and the Balearic Islands by 3.2%.
Furthermore, BBVA Research emphasizes that the impact on employment and internal demand as a result of Dana in the Valencian community has been less negative than expected, and the recovery has been faster than indicated three months ago, leading to an upward revision of the GDP in the Valencian community to 3.2%.
In addition, experts in BBVA’s research anticipate that Catalonia will increase by 3% and Madrid by 2.8%. They also explain that private consumption and the end of the effects of the drought will support the evolution of activity in Andalusia (3%), Murcia (2.9%), and Castilla-La Mancha (2.8%).
On the contrary, the minimal weight of services, the export of goods, expectations for changes in European fiscal policy, and fiscal consolidation hinder progress in the Northern and Extremadura autonomous communities.
Specifically, Navarra, La Rioja (2.7%), Galicia (2.6%), Extremadura (2.6%), Basque Country (2.5%), Aragon (2.4%), Asturias and Cantabria (2.3%), and Castilla y León (2.2%) will show «solid» growth rates, although below the average.
In 2026, BBVA’s research revision for Spain’s GDP is straightforward (+0.1 points to 1.8%), and some exhaustion of foreign expenditure contribution and a lower increase in public consumption are expected.
This impacts GDP growth forecasts in the islands (Canary Islands, 1.7%; Balearic Islands, 1.6%) and in Catalonia (1.6%). Furthermore, experts warn that fiscal consolidation may limit progress in regions where the weight of public administrations is higher, such as in Extremadura (1.5%) and Andalusia or Murcia (1.6%).
On the other hand, the research service indicates that the decrease in interest rates, combined with new case needs and a neutral fiscal policy, will support investment progress in some autonomous communities.
In the case of Madrid, with a 2% increase, BBVA Research suggests it could benefit from expected investments, particularly in housing construction.
Additionally, the increased demand for equipment and machinery could particularly benefit northern autonomous communities with a higher industrial weight. This could allow GDP progress in 2026 above average in Cantabria and Navarra (both 2%) and the Basque Country (1.9%). Furthermore, the Valencian community (2.7%) will lead to an increase the following year, due to the momentum from measures to support those affected by floods.
However, BBVA’s research warns that some risks in the scenario persist that could limit future growth. One of them is the uncertainty generated by a possible increase in tariffs in the United States, which could affect Spanish exports.
While the direct impact is expected to be less than in the rest of the eurozone, due to lower exposure of Spanish companies to US demand, the repercussions will vary by region and sector.
In particular, sales of equipment, machinery, medicines, automobiles, and food and beverages could be more affected, with a significant impact in the country, the Valencian community, and Andalusia. Moreover, these effects could be amplified by increasing uncertainty in economic policy and its impact on investments.
Another structural challenge, according to BBVA Research, is the difficulty of addressing the housing crisis. The lack of political consensus has hindered the implementation of efficient solutions, as evidenced by the recent rejection of land law reform in Congress.
Factors such as high construction costs, labor shortage, increasing low productivity, and bureaucracy in land management contribute to rising prices. This issue is particularly critical for the Mediterranean coast, the islands, and Madrid.
Finally, experts warn that increasing uncertainty in economic policy in recent months is an additional risk factor. «Currently, seven autonomous communities operate without approved budgets, affecting territories representing 43% of the Spanish population,» they point out.
Furthermore, it is emphasized that the central administration continues to work with budgets exchanged since 2023. Although, for the time being, this situation has not had a direct impact on economic activity, it could generate medium-term consequences, affecting the fulfillment of government commitments and increasing social dissatisfaction.
