MADRID - The Spanish central bank said on Friday it expects the country's gross domestic product to expand 0.4% in the second quarter from the previous one after it had said it expected 'small' growth or even a contraction as the easing of COVID-19 restrictions led to a stronger recovery in industries such as tourism.

The Bank of Spain lowered its economic growth forecast for the full year to 4.1% from 4.5% after as a result of the lower-than-expected 0.3% first-quarter growth due to the impact from Russia's invasion of Ukraine and the Omicron COVID-19 variant on economic activity.

In its report published on Friday, the central bank said the lower growth in the first quarter was partly offset by a "strong dynamic in services in April and May."

In its previous estimate in April, the Bank of Spain had foreseen a small growth in the second quarter, not ruling out a contraction.

The diplomatic spat with Algeria could have a significant impact on the Spanish economy and on inflation in the short-run, though it is early to estimate it two days after the North African country cut all non-gas trade with Spain, the central bank's Chief Economist Angel Gavilan told reporters on Friday.

The central bank then expects growth to slow down to 2.8% in 2023, also less than the previously predicted 2.9%. It then sees the economy growing 2.6% in 2024.

Last year, the Spanish economy rebounded 5.1% after a record 10.8% slump in 2020 induced by the coronavirus pandemic.

The central bank projected annual EU-harmonised consumer inflation at 7.8% at the end of the second quarter. On Friday, Spain's National Statistics Institute said the equivalent inflation rate rose 8.5% in May from a year earlier.

For all of 2022, inflation should reach 7.2%, down from 7.5% in 2021, before gradually dropping to 1.8% by 2024.

(Reporting by Emma Pinedo and Jesus Aguado, editing by Inti Landauro and Toby Chopra)