Bank cuts Balearic growth forecast because of referendum result

The bank's latest report looks at the repercussions of the Brexit vote region by region, with certain ones likely to be affected more than others. It identifies Murcia, Valencia and the Canaries in particular, with the forecast reduced by 0.6% for the former and by 0.5% in the other two. These are the highest reductions that the report envisages, with all regions of the country experiencing a fall, and the forecast for the Balearics being 0.4% (as it is also, for instance, in Catalonia).

BBVA believes that the most direct effects of the vote will be felt through a slowdown in the UK economy and a fall in the value of the pound. Both factors may well influence the level of tourism, especially to the sun-and-beach regions.

There is likely to also be an impact on incomes of British residents. The bank puts this number at around one million, and identifies Murcia and Alicante as two areas where British residents are particularly relevant to the local economy; hence the higher reductions in growth being forecast for Murcia and Valencia.

Countering this, at least where the current year is concerned, there have been upward revisions of regional growth forecasts because of tourism and increased domestic consumption. These factors have been especially apparent in the Balearics, the Canaries and the Mediterranean coastal regions.

This has led to strong growth in employment, with the Balearics at the top with 6.6% job creation ahead of 4.6% in the Canaries. BBVA stresses, however, that these regions may well now be subject to the greater risks, especially because of the Brexit vote.