Bank of Spain sees up to 0.7% fourth-quarter growth, raises longer-term outlook

MADRID, Dec 23 (Reuters) - Spain's economy likely expanded at a rate of between 0.6% and 0.7% in the fourth quarter, the Bank of Spain said on Tuesday, far outpacing other large euro zone economies and in line with the 0.6% quarterly growth recorded between July and September.

In Tuesday's quarterly update, the central bank raised its outlook for full-year growth in 2025 to 2.9% from a previous estimate of 2.6%. It also upped its growth projections for 2026 to 2.2% and for 2027 to 1.9%.

Following the COVID-19 pandemic, the Iberian country, one of the world's most visited by tourists, has been riding a swell in domestic demand stimulated by European recovery funds, making it an outlier within a largely sluggish euro zone.

The central bank expected inflation to moderate to 2.1% in 2026 and 1.9% in 2027 from an estimated 2.7% this year.

The budget deficit projections remained unchanged at 2.5% of gross domestic product in 2025 and 2.1% in 2026 before rebounding to 2.5% in 2027.

Meanwhile, the debt-to-GDP ratio is expected to end this year at 100.6% and then shrink to 99.1% by end-2026 and 98.3% at end-2027.