Unicaja Banco has published the issue number 4 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 estimates made by the research company of Grupo Unicaja Banco indicate a strong decrease of the Gross Domestic Product (GDP) in all Castilla y Leon in 2020 and a general increase in 2021.
This report focuses on the analysis of the evolution and economic outlook of each one of the provinces, and it supplements the regional economic forecast report published on 14 January.
According to the estimates made by Analistas Económicos de Andalucía, in the best-case scenario, in 2020, all provinces would register a decrease in activity of over 9%, and over 11.5% in Palencia and Burgos. In a worst-case scenario, the contraction would be of over 9.5% in all provinces (see chart in page 3).
The forecasts for 2021 indicate a growth in activity of over 5.5% in all the Castilla y Leon provinces, ranging from 5.5% in Palencia to 8.0% in Soria. However, in a worst-case scenario, the growth would be under 6.0% in all the provinces.
The report is divided into three sections: the first one describes the international and national economic backdrop and it includes the main features of the recent behavior of the regional economy. Secondly, a comparative of the main indicators of each province 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 (GDP) for 2020 and 2021.
Provincial analysis: recent evolution of the main economic indicators
According to the estimates made by Analistas Económicos de Andalucía, in the third quarter of 2020¸the economic activity would have dropped in all provinces, although more moderately than in the previous quarter. In Palencia (-6.4%), Burgos (-6.3%), Zamora (-6.1%), Salamanca (-6.1%) and Leon (-5.8%) the decline would have been more pronounced than in the region as a whole (-5.5%), although those rates are not strictly comparable.
With regard to employment, according to the figures published by the Labour Force Survey (Encuesta de Población Activa, EPA), the crisis is having a strong impact, although the number of those in employment grew in the third quarter in all provinces but Palencia. The growths in Leon (10,500 more employees than in 2Q) and Burgos (9,700) are to be remarked. These employment figures include those workers affected by the furlough schemes (ERTE).
However, in year-on-year terms, there is a general drop in employment in all provinces but Avila (0.6%). In the other provinces, the falls exceed the regional average (-3.4%) in Leon (-7.8%), Palencia (-5.6%) and Soria (-4.0%).
The impact on employment adjustment is also reflected in the evolution of the contribution to the Social Security. In the aggregate from January to November, the number of people under the Social Security scheme has decreased in the all the region, with drops over the regional average (-1.9%) in Palencia (-2.6%), Burgos (-2.5%) and Salamanca (-2.2%). However, a comparison of November and April figures –when contribution to the Social Security reached its low record- shows a general growth of contribution, even over the regional average in the provinces of Leon (3.0%), Zamora (4.5%), Avila (3.7%), Palencia (3.6%), Soria (3.2%) and Segovia (3.2%).
In the current context, the estimates of the research company of Grupo Unicaja Banco indicate a strong loss of activity in all the provinces for 2020. In the best-case scenario, the decline could range from 9.2% in Avila to 12.0% in Burgos. In the worst-case scenario, the drops could exceed 9.5% in all provinces, ranging from -9.6% in Avila to -12.5% in Burgos.
For 2021, the estimates anticipate a general growth in the economic activity, at rates over 5.5% in all provinces, and ranging from 5.5% in Palencia to 8.0% in Soria, and also over the regional average (6.4%) in Avila, Burgos and Segovia, although those rates are not strictly comparable. In a worst-case scenario, the projected growth would remain under 6.0%, with rates over the regional average (4.0%) in Soria, Avila, Segovia, Burgos and Salamanca.
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 backdrop, 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 14 January.
The advances in the production and distribution of COVID-19 vaccines, as well as the start of vaccination, have resulted in an improvement of the global economic prospects, although uncertainty remains high.
The OECD, in its latest Economic Outlook report, indicates that the activity will remain limited and that social distancing and partial closure of borders are likely to remain in force during the first half of 2021. Against that backdrop, the OECD forecasts that, in 2021, the global economy will grow by 4.2%, after a similar decline in 2020, although the outlook is subject to an unusually high degree of uncertainty.
Although the impact of the pandemic has been general, there are significant differences between countries¸ due to factors such as the virus spread, implemented containment measures and the sectorial structure. In that sense, the Spanish economy, highly dependent on tourism and on activities subject to higher social interaction, will be one of the UE economies to record in 2020 a higher decline in production, although it will be among those recording a stronger growth in 2021.
The latest projections of the Bank of Spain indicate a GDP drop of 10.7-11.6% in 2020, depending on the scenario. In any case, this contraction would be followed by a relatively intense recovery, with estimated growths for 2021 ranging between 4.2 and 8.6%.
With regard to the Castilla y Leon economy, the GDP grew by 15.8% in the third quarter of 2020, after falling by c.15% in the second quarter. The y-o-y GDP decrease has been of 5.5% (-18.8% in the previous quarter), according to the data from the Regional Quarterly Accounts published by the Dirección General de Presupuestos y Estadística de la Junta de Castilla y León. The internal demand deducted 6.4 p.p. to growth, with a quarterly increase in household consumption and investment over 15%. However, in y-o-y terms, household consumption has fallen by 6.8% and investment, by 13.6%. The contribution of the external balance is now positive (0.8 p.p.) due to a decrease which has been lower in exports (-6.1%) than in imports (-6.5%).
From the point of view of supply, according to the Regional Accounts, in the third quarter of 2020 there has been general q-o-q growth in the Gross Added Value, with the highest increases in construction (23.4%), industry (17.4%) and services (15.6%). When compared with one year before, agriculture (9.0%), energy (12.1%) and non-market services (2.1%) record an increase in production, whereas the other sectors fall, even over 8% in construction and market services.
The forecasts of Analistas Económicos de Andalucía indicate that in 2020, the Castilla y León GDP may fall between 10.7 and 11.1%. A growth of 6.4% -or 4.0% in a less favourable scenario- is expected in 2021, as mentioned in the report ‘Previsiones Económicas de Castilla y León’ published on 14 January. It should be noted that uncertainty remains high, hindering projections.