The Valencian Community’s economy is forecast to grow by around 2.8% in 2026, according to the second-quarter report by the Business Confederation of the Valencian Community (CEV). The projected growth is higher than the forecast for Spain as a whole.

According to Spain’s Independent Authority for Fiscal Responsibility (AIReF), the region’s GDP grew by 0.8% quarter on quarter and 2.9% year on year in the second quarter. Quarterly growth was 0.1 percentage points above the national rate and 0.2 points above the eurozone figure. The year-on-year differences were 0.2 and 1.7 percentage points, respectively.

Domestic demand and employment support growth

Domestic demand remains the main driver of economic growth. Household spending is being supported by favourable labour-market conditions. Government consumption is also increasing, though at a more moderate pace.

According to the CEV report, investment is being supported by the recovery of areas affected by the DANA floods and by the final stages of projects funded through the European Union’s NextGenerationEU programme.

Construction, services and tourism remain buoyant

Economic performance continues to vary across sectors. Construction and services are growing strongly, while industry is gradually regaining momentum. In the second quarter, industrial output rose by 2.03% compared with the previous quarter, while industry turnover increased by 8.4% year on year. However, output was still down 1.3% for the year to date.

Employment in construction grew by 19.6% year on year, while turnover in the services sector rose by 4.6%. Tourism also performed well: 3.83 million international visitors came to the Valencian Community between April and June, 10.4% more than during the same period a year earlier. Their spending increased by 11.3%.

By contrast, the primary sector continues to face unfavourable conditions. The CEV points to a smaller citrus harvest, falling agricultural employment and a decline in the number of businesses.

CEV warns that productivity growth remains weak

The report notes that economic growth is largely being driven by job creation, without a comparable increase in GDP per person employed. In the CEV’s view, stronger productivity growth is needed to sustain the economy and improve living standards. It is also important for strengthening companies’ competitiveness and investment capacity.

The confederation identifies geopolitical tensions and their impact on energy prices, logistics costs and supply chains as key risks. Other concerns include persistent inflationary pressure, weakness in some European markets and rising international trade tensions.

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