Economic impact of drought is laid bare: Andalucia to grow less than the rest of Spain due to affected industries, study says

ANDALUCIA’S economy is predicted to grow slower compared to other Spanish regions this year, with a study suggesting that the drought is to blame.

The region’s will grow by 1.7% in 2024, compared to the national average of 2.1%, says the March report produced by BBVA Research.

“Agricultural production in southern communities continues to be affected, leading to below-average growth in Castilla-La Mancha, Andalucia, Extremadura and Murcia,” the BBVA said.

Nevertheless the bank’s projections are more optimistic than January figures suggesting a 1.4% growth in Andalucia, though the Spanish national average has also been raised from 1.5% to 2.1%.

“Good employment figures and better domestic consumption, the likelihood of lower interest rate and a more expansive fiscal policy, together with the boost of services exports, are helping to boost growth,” says the bank.

Tourism, with spending by foreign visitors reaching record levels, also contributes to the improvement, while investment slows down due to the lower impact of the expected EU Next Generation funds and the uncertainty of the Spanish political situation.

By 2025, the remission of the drought’s negative impact will lead to an acceleration of Andalucian growth to 2.4%, which will put it among the country’s top five regions for growth.

At the same time, Spain as a whole will increase its GDP by 2%, one tenth less than in 2024, and this will mean the Andalucian economy will grow faster that the Spanish economy for the first time since the Covid-19 pandemic.

In 2021, according to BBVA data, Andalucia grew by 6.2% (compared to 6.4% in Spain); in 2022 it was 5.2% (compared to 5.8% nationally); in 2023 by 2.1% (compared to 2.5%); and in 2024 it will improve by 1.7%, while Spain will advance by 2.1%.

The trend will stop in 2025, when Andalucua will grow significantly more than Spain, according to BBVA Research.

The bank says that employment in the private services sector, excluding commerce and hospitality, has grown in Andalusia since 2019 by 16%- well above the average, and only surpassed by the Valencian Community.

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