Spain set to record near-record tourism year to boost economy

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Undeterred by European airport chaos and double-digit inflation, visitors are flocking to Spain’s sunny beaches in near-record numbers.

So much so that tourism, which accounts for around 13% of the eurozone’s fourth-largest economy, is on track to fully recover a year earlier than expected. It would improve the outlook for the nation which faced the deepest contraction in the region when the pandemic hit in 2020.

“Tourism has exceeded best expectations – until recently it was hard to think we could have returned to 2019 levels,” Carlos Cuerpo, Spain’s treasury chief, said in an interview. “Beyond a growth review, what’s important are the positive expectations we’re seeing.”

Cuerpo believes that the strength of the recovery in tourism in the first summer without health restrictions could raise growth expectations for the year as a whole. It would help undo the damage wrought by the travel crisis in a country that in the year before the pandemic saw by far the most nights spent by international guests in the region.

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Spain’s rise is expected to be felt in southern Europe, where tourism is an important driver of growth and employment, particularly in destinations such as Greece and Portugal.

It would be good news at a dark time for the continent’s economy, as the danger of a recession looms if Russia cuts gas supplies.

Spain’s tourism frenzy suggests that for now visitors are ignoring inflation which is near a four-decade high in the country.

Restaurants and hotels are hiring there. Employment was already at pre-pandemic levels in June, according to tourism industry group Exceltur, which forecasts the sector will generate 152 billion euros ($154 billion) in revenue this year. That would almost match the record set in 2019.

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So far, flight cancellations and cabin crew strikes across Europe have also failed to dent demand.

“These problems at airports and airline strikes have caused temporary damage, but in general all the prospects are that the summer will be good,” said Alberto Urtasun, head of the Bank’s economic forecasts division. ‘Spain.

High-frequency data such as flight and hotel bookings indicate the tourism sector may be on track to return to pre-pandemic levels this year, Urtasun said. That would be earlier than the bank’s initial forecast for 2023.

Some analysts warn that the boom could fade once energy shortages and high consumer prices dampen savings built up during the pandemic. Consumer confidence in Europe fell to near-record lows in June.

“This summer, economic fundamentals are overshadowed by the desire to go on vacation at all costs,” said Maria Romero Painagua, chief economist at Madrid-based consultancy Afi. “These fundamentals will resurface once the summer is over and consumers will cut spending.”