Bank of Spain sees 2.2pc second-quarter growth, ups longer-term outlook

MADRID: Spain's economy is likely to grow 2.2% in the second quarter from the January-March period, when it shrank 0.5%, thanks to rising internal demand unleashed by looser COVID-19 restrictions and rising vaccination rates, the central bank said on Monday.

After a record 10.8% slump last year, the central bank expects gross domestic product to expand between 4.6% and 6.8% this year, with its central scenario pointing to 6.2% growth, up from 6% in its previous outlook released in March.

It also raised its forecasts to 5.8% for next year, from 5.3% previously, and to 1.8% for 2023, from 1.7%.

In the second quarter, its quarter-on-quarter growth forecast ranges from 1.4% to 2.7%.

"This upturn in activity has intensified markedly in the course of the second quarter of the year, in line with the more favourable evolution of the pandemic," the Bank of Spain said in its report, though it added that uncertainty was still high.

It also predicted a services and consumption-driven recovery, thanks in part to savings accumulated by Spanish households, to be buoyed by a gradual recovery of the labour market and the implementation of EU-funded business projects.

Still, with international travel likely to remain subdued amid concerns over more contagious COVID-19 variants, the bank does not expect Spain's tourism-dependent economy to reach pre-pandemic levels until the end of 2022.

Chief Economist Oscar Arce warned this summer would be far from normal in terms of tourist numbers and expenditure, and pushed back a forecast for international arrivals to recover pre-pandemic levels to 2023 from 2022.