Bank of Spain ups 2024 economic growth forecast on tourism boom

MADRID (Reuters) – Spain’s central bank on Tuesday raised this year’s economic growth forecast to 2.8% from 2.3%, predicting an acceleration from 2023, largely thanks to booming tourism.

It was the second straight outlook upgrade by the Bank of Spain this year following its initial forecast of a 1.9% expansion. Last year, the economy grew 2.5%.

It also contrasted with the fortunes of the wider euro zone. The European Central Bank on Thursday lowered its 2024 economic growth projection for that region to 0.8% from 0.9%.

Spanish growth is likely to slow down in the third quarter to 0.6% from the preceding three months, when the economy grew a stronger-than-expected 0.8%, Tuesday’s report said. It noted that the strong second quarter had a positive carry-over effect on the full-year forecast.

In the first seven months of 2024, spending by foreign visitors rose 18.6% to 71 billion euros ($79 billion), boosting net external demand, despite initial concerns over anti-tourism protests and extreme summer temperatures.

Population growth through migration flows and the Spanish manufacturing sector’s relative resilience compared to euro zone peers were also contributing to higher growth, the central bank said.

While private consumption was still lagging, it expected lower interest rates and slowing inflation to allow for an improvement in the coming quarters.

The central bank also raised the outlook for 2025 and 2026, to 2.2% and 1.9% from 1.9% and 1.7%, respectively.

It now expects inflation to hit 2.9% this year, down from 3% predicted three months earlier, and then to gradually moderate to 2.1% and 1.8% in the following two years.