The Valencian Community and the Canary Islands are expected to top Spain’s regional economic growth rankings in 2025, with GDP expansions of 3.6% and 3.5%, respectively. The projections were released on Thursday by BBVA Research, which also revised Spain’s national GDP forecast for 2025 upward by half a percentage point to 3%, citing a stronger performance in exports of non-tourism goods and services and a moderate improvement in global demand.
Tourism and Service Exports Drive Regional Differences
According to BBVA’s regional outlook, the varying degree of exposure to service exports, especially foreign tourism, explains the contrasting regional performances. Although consumption by non-residents is beginning to show early signs of moderation, it continues to evolve positively. This trend supports particularly strong growth in island territories, where tourism plays a major economic role.
Thus, the Canary Islands (3.5%) and the Balearic Islands (3.2%) are projected to lead the group of fastest-growing regions, closely followed by Madrid (3.3%) and Catalonia (3.1%), which are also benefiting from robust non-tourism service exports.
The Valencian Community (3.6%) is forecast to achieve the highest growth rate in the country, supported by the recovery of goods exports, increased public investment, and the execution of European recovery funds (Next Generation EU / MRR).
Public Investment and European Funds Bolster Growth
BBVA Research attributes part of the upward revision to the resilience of Spanish goods exports and to the greater momentum of public investment. Regions with a higher exposure to the implementation of European Recovery and Resilience Facility (MRR) funds, alongside targeted aid for areas affected by Storm DANA, will benefit the most.
Consequently, Murcia (3.3%), Andalusia (3.2%), and Castile-La Mancha (3.1%) are also expected to grow above the national average.
Regions with stronger industrial bases or a higher reliance on public consumption, such as Castile and León (2.9%) and Galicia (2.8%), will expand at a more moderate pace, while La Rioja (3%) is projected to perform slightly better than the national mean.
In contrast, slower recovery in manufacturing is expected to weigh on northern regions:
Aragon (2.2%), Asturias (2.3%), Navarre (2.4%), the Basque Country (2.4%), and Cantabria (2.5%) will likely grow below the Spanish average. Limited public spending and weaker exposure to foreign tourism also explain the subdued outlook for Extremadura (2.5%).
Outlook for 2026: Valencian Community to Remain in the Lead
Looking ahead to 2026, BBVA Research has again revised Spain’s GDP growth forecast upward, this time by 0.6 percentage points to 2.3%. While external demand is expected to play a smaller role, domestic demand will remain the main driver of growth, helping to narrow the regional gap with northern Spain.
A slowdown in foreign tourism is anticipated, slightly moderating growth in the island economies. Both the Canary Islands (2.3%) and the Balearic Islands (2.2%) are expected to grow roughly in line with the national average, while Catalonia (2.3%) will also see a mild deceleration.
The Valencian Community will again take the lead, with projected GDP growth of 2.9%, benefiting from the post-storm recovery following the sharp decline in activity in late 2024.
Higher defence spending, coupled with faster execution of European funds, will sustain activity in Galicia (2.6%), Madrid (2.5%), Murcia (2.4%), and Andalusia (2.3%). Increased investment in renewable energy could also narrow the growth gap for Aragon (2.3%).
Meanwhile, industrial restructuring and the gradual recovery of European domestic demand will support the economies of Navarre (2.4%), Cantabria (2.2%), the Basque Country (2.1%), Castile and León (2.1%), La Rioja (2.0%), and Asturias (1.9%). By contrast, Castile-La Mancha (2.0%) and Extremadura (1.8%) could experience weaker growth due to slower public consumption.
GDP Per Capita: Convergence and Divergence Trends
BBVA Research also highlights convergence trends among regions with historically lower income levels. If its forecasts hold true, Galicia, Asturias, and Castile and León will record the strongest growth in GDP per capita between 2019 and 2026 among lower-income regions.
At the same time, wealthier regions such as La Rioja, Madrid, and the Basque Country are expected to maintain above-average growth, preserving their higher relative income levels.
