Spain's booming tourism industry will buoy the country's overall economic growth rate to a solid 2.3% in 2024, much higher than its European Union peers, the Bank of Spain said on Tuesday.

In its quarterly outlook update, the central bank raised its growth forecast from a previous 1.9% three months ago. Last year, the Spanish economy expanded 2.5%.

"The positive surprise in activity is mainly due to the dynamism of tourism services exports," the report said, adding that

more foreign tourists are visiting

more areas of the country and are spending more.

The stronger-than-expected 0.7% growth rate in the first quarter also had a positive carry-over effect on its forecast for the full year, the bank said.

In the second quarter, the central bank expects quarterly growth of 0.5%, while it maintained its 2025 and 2026 growth forecast at 1.9% and 1.7% respectively.

Spain's growth would outperform other big European Union economies and is clearly above the average 0.9% forecast

for the euro zone in 2024.

The growth forecast for Spain contrasted with the Bundesbank's decision to lower its estimate for German economic growth to 0.3% from a previous 0.4% for 2024.

But the Bank of Spain warned uncertainty on the sustainability of the services sector's dynamism as well as the reactivation of EU fiscal rules, limiting budget deficits, could hamper growth.

"Compliance with these rules will require the design and implementation of a medium-term fiscal consolidation plan that will allow for a bigger correction of the public deficit than the one envisaged in these forecasts," the report said.

The Bank of Spain raised its EU-harmonised consumer inflation outlook to 3% this year from a previous 2.7% as it expects higher energy prices and faster core inflation.

The bank expects a gradual moderation in the pace of inflation to 2% and 1.8% in the following two years, although at a more moderate path than previously expected. (Reporting by Emma Pinedo and Inti Landauro, editing by Andrei Khalip, Charlie Devereux and Chizu Nomiyama)