Unicaja Banco has published the issue number 2 of its quarterly report ‘Situación económica y perspectivas de las provincias de Castilla y León (Economic Situation and Outlook of the Castilla y Leon Provinces), prepared by Analistas Económicos de Andalucía, the research company of Grupo Unicaja Banco. This report focuses on the analysis of the evolution and economic outlook of each one of the Castilla y Leon provinces, and it supplements the regional economic forecast report published on 24 July. The estimations made by Analistas Económicos de Andalucía indicate a strong decrease of the economic activity in all Castilla y Leon provinces in 2020.
According the said estimations, in the best-case scenario, all provinces would register a decrease in the activity in 2020 ranging from 7.9% in Avila to 10.3% in Burgos. In the worst-case scenario, the reduction would be range from 11.5% in Segovia to 12.8% in Burgos, exceeding 11.5% in all provinces.
The report is divided into three sections: the first section describes the international and national context and it includes the main features of the recent behavior of the regional economy. Secondly, a comparative of the main indicators of the nine Castilla y Leon provinces is made, and finally, the third section includes the evolution of the main economic indicators for each province, as well as the forecasts on the evolution of the economic activity for 2020.
Provincial analysis: recent evolution of the main economic indicators
According to the estimations of the Activity Synthetic Indicator of Grupo Unicaja Banco’s research group, in the first quarter of 2020¸ the economic activity has fallen in all Castilla y Leon provinces, with Burgos (-3.7%), Palencia (-3.5%), Leon (-3.4%) and Zamora (-3.4%) exceeding the regional average (-3.2%), although those rates are not strictly comparable.
With regard to employment, in the aggregate from January to June 2020, the number of people under the Social Security scheme has decreased by 1.6% year-on-year, with a general drop in all provinces. In Palencia, Burgos, Zamora and Salamanca the decrease exceeds the mentioned regional average. In this sense, a more pronounced decline in the contribution to the Social Security scheme is seen in those provinces with a higher weight of the industrial sector, as it is the case of Burgos and Palencia.
In the current context, the estimations of Grupo Unicaja Banco’s research group for Castilla y Leon provinces indicate a strong drop of the economic activity in 2020. In the best-case scenario, the falls in activity could range from 7.9% in Avila to 10.3% in Burgos. In the worst-case scenario, the drops could range from 11.5% in Segovia to 12.8% in Burgos.
International, national and regional economic environment
The first section of the document ‘Situación económica y perspectivas de las provincias de Castilla y León’ covers the international and national economic context, and the main features of the recent evolution of the regional economy, information included in the report ‘Previsiones Económicas de Castilla y León’, published on 24 July.
The coronavirus pandemic has caused the most serious economic recession since World War II, what has made governments and central banks to implement exceptional measures to support the health systems, as well as household income and the productive fabric.
The OECD forecasts that the global economy will fall this year by 6.0%, and even by 7.6% if there is a second outbreak that results in new lockdown measures. The IMF has revised downwards its forecasts, estimating a fall in the global GDP of 4.9%, with a higher concentration for the advanced economies, and, especially, for the Euro Zone.
Within the Euro Zone, the Spanish economy will be one of the European economies to register a higher output shrink in 2020, with an expected GDP drop of over 10%, according to the estimations made by the main international bodies. The Bank of Spain estimates a GDP decline ranging from 9.0%, in an early recovery scenario, to 11.6%, in a gradual recovery scenario, although it does not rule out a higher decrease in a less favourable scenario of ‘slow recovery’ (15.1%), which would include the possibility of additional strict lockdown measures.
In Castilla y Leon, the latest data from the Quarterly Regional Accounts of Castilla y Leon, show a GDP decrease of 3.2% y-o-y, as indicated in the report ‘Previsiones Económicas de Castilla y León’, prepared by Analistas Económicos de Andalucía and recently published. The internal demand deducted 3.8 p.p. to the regional growth, with a strong decrease in household consumption (4.5%) and investment (8.1%).
According to the data published by the Quarterly Regional Accounts of Castilla y Leon, the Gross Added Value has increased in the agricultural sector (5.4%), in the energy section (9.3%) and in non-market services (3.8%), whereas it has decreased in construction (-8.4%), market services (-4.9%) and manufacturing (-4.5%).
Some of the indicators available for 2Q2020 reflect a certain stabilization from May. In this line, the figures of contribution to the Social Security have improved in May and June, although it records a 3.7% fall year-on-year. In particular, between April and June, the average number of employees under the Social Security scheme has increased by over 8,800, after falling by nearly 30,400 between February and April. Furthermore, between April and June, the number of employees temporarily furloughed due to force majeure (ERTE) has reduced to less than a half, standing at 63,464, according to the figures of the Ministry for Inclusion, Social Security and Migrations, and included in the document ‘Previsiones Económicas de Andalucía’, recently published.
As for the growth forecasts for Castilla y Leon, it is estimated that in 2020 the regional GDP may fall between 9.1 and 12.1%, in line with the expectations for Spain, although a higher impact cannot be ruled out if the health situation worsens, as it was said in the report ‘Previsiones Económicas de Castilla y Leon’. The output recovery would start from the second quarter of the year, and the regional economy is expected to grow, in 2021, by 6.9%-8.5%. However, uncertainty levels remain high, what makes it extremely complex to make forecasts.