Andalucia’s economy is set to grow faster than previously expected in 2026 despite global instability, according to a leading regional think tank.

The Economic Observatory of Andalucia (OEA) has upgraded its growth forecast for the region to 2.3% this year, up from its previous prediction of 2%.

Economists said the stronger outlook comes after Andalucia matched Spain’s national growth rate in the first quarter of the year, expanding by 0.7% despite severe spring storms and the major rail disruption in Adamuz.

Francisco Ferraro, president of the OEA, said Andalucia has continued to benefit from strong consumer spending, record employment levels and a tourism boom fuelled by Spain increasingly being viewed as a ‘safe haven’ amid conflict elsewhere in the Mediterranean and Middle East.

He also pointed to rising construction activity, increased public works linked to EU funding and growing defence spending, which particularly benefits Andalucia due to its military and aerospace industries.

Ferraro said the defence sector alone could add an extra tenth of a percentage point to regional GDP growth.

Tourism remains one of the biggest drivers behind the optimistic forecast, with Spain continuing to attract visitors seeking stability away from geopolitical tensions affecting other destinations.

But the economist also warned that the current growth model may not be sustainable in the long term.

He said Andalucia’s economic expansion is increasingly reliant on mass tourism, cheap labour and public spending – factors he described as ‘not healthy’ foundations for future growth.

‘I don’t know if it is healthy that instead of 100 million tourists, 300 million come,’ Ferraro warned.

He also highlighted concerns over stagnant productivity, warning that long-term prosperity depends on improving efficiency rather than simply increasing visitor numbers and labour supply.

Inflation is also expected to remain above 3% this year, while weaker economies in Germany and France could eventually hit Andalucian exports.

For now, however, the region continues to show resilience.

Exports have held up better than expected thanks partly to a spike in sales from Sevilla’s aerospace sector, while employment has climbed to record highs.

The OEA predicts Andalucia’s economy will slow slightly to 1.9% growth in 2027 unless new factors emerge to boost activity further.

Read more Andalucia news at the Spanish Eye.