Unicaja Banco has published the issue number 103 of the quarterly report ‘Previsiones Económicas de Andalucía’ (Economic Forecasts for Andalusia), prepared, as in previous editions, by Analistas Económicos de Andalucía (research company of Grupo Unicaja). According to the said report, the estimations made by Analistas Económicos de Andalucía indicate that the GDP in 2020 could have recorded a decrease ranging from 11.7%, in the best-case scenario, to 12.2% in the worst-case scenario, whereas the employment could have fallen by more than 4% in the year average. This way, the unemployment rate would stand between 23.3 and 23.7%.
For 2021, the estimations suggest that the GDP could grow by 4.1-6.7%. An increase of 0.6-2.0% in employment is expected for the year average, with the unemployment rate standing at 24.4%, though it could reach 25.4% in the worst-case scenario.
This report is divided into three sections: 1) Economic environment; 2) Recent evolution of the Andalusian economy; and 3) Economic outlook for Andalusia 2020-2021. The first section describes the international and national backdrop. The second section analyses the situation of the Andalusian economy, paying special attention to the evolution of the main indicators and to the region’s productive specialization. Finally, the last section includes outlooks on the forecasts on the evolution of the Gross Domestic Product (GDP) and employment in Andalusia for 2020 and 2021.
The report prepared by the research company of Grupo Unicaja Banco also includes a chart on the recent evolution of the real estate market.
Global and national economic environment
The advances in the generation and distribution of COVID-19 vaccines, as well as the start of vaccination, have resulted in an improvement of the global economic prospects. However, the OECD indicates that the first months of 2021 will be marked by the existence of restrictions to activity, due to the adopted lockdown measures, social distancing and the partial closure of borders.
The OECD forecasts that, in 2021, the global economy will grow by 4.2%, after a similar decline in 2020, although its forecast is subject to a high degree of uncertainty.
Although the economic 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 activities subject to higher social interaction, will be one of the European economies to record in 2020 a higher decline in production.
According to the interim Spanish National Quarterly Accounts (Contabilidad Nacional Trimestral de España), published by the National Statistics Institute (INE), in the third quarter 2020, the GDP grew by 16.7% q-o-q, with a year-on-year fall of 8.7% (-4.3% in the Euro Zone).
Both household consumption and investment increased by c.20% in the quarter, although they post a decline of over 10% compared with one year earlier. The same happens with exports, which reach a 74.3% decrease in the tourism component. From the point of view of supply, and despite the improvement observed in the third quarter, the y-o-y decrease was general, except in agriculture and within services, in public administrations and financial activities.
For the whole 2020, the Bank of Spain estimates a GDP drop of 10.7-11.6%, followed by a relatively intense recovery in the next two years, with estimated growths for 2021 ranging between 4.2 and 8.6%. This recovery will be determined by factors such as the epidemiologic evolution or the reach of the NGEU recovery package.
Recent evolution of the Andalusian economy
The latest data from the Quarterly Regional Accounts of Andalusia, related to the third quarter of 2020, published by the Instituto de Estadística y Cartografía de Andalucía (IECA), show a GDP increase of 14.5%, thus recovering more than 50% of the loss registered in the first half of the year. In y-o-y terms, the GDP fell by 8.5% (19.8% in the second quarter).
The internal demand deducted 7.6 p.p. to growth, with a q-o-q growth in household consumption of over 20%. However, in y-o-y terms, household consumption decreased by 9.2%, and investment, by 15.6%. The external balance made a negative contribution of 0.9 p.p., due to the higher decrease in exports (-20.4%) than in imports (-16.5%).
From the point of view of supply, the q-o-q growth in Gross Added Value was general, exceeding 30% in retail, transportation, hospitality and art and leisure activities. However, the added value decreased year-on-year in most sectors, with the exception of public administrations, financial and insurance activities, and agriculture, according to the data published by IECA.
With regard to the labour market, according to the latest data of the Labour Force Survey (EPA), the employment had a better performance in the third quarter of 2020, with the recovery of one third of the employment destroyed in the first half of the year. The employed in Andalusia reached 3 million, with a q-o-q increase of 76,200. This figure includes those affected by furlough schemes (ERTE). The unemployment rate stands at 23.8% (16.3% in Spain).
However, the number of people in employment decreased by 3.7% year-on-year (-3.5% in Spain), with a significant reduction among those with a temporary employment contract (-15.7%). The fall in employment is especially significant in market services, with the sectors of retail, transportation and hospitality representing nearly 70% of the lost jobs (-99.000 employees).
The numbers of employees contributing to the Social Security scheme continue to reflect the job loss in comparison with the previous year, although contributions are increasing since April. The areas of hospitality and art and leisure activities are those which show a larger decrease in contribution when compared with the previous year, whereas health activities, education, agriculture or construction showed in November a number of employees higher than the figure of the same month in 2019.
Economic Outlook for Andalusia 2020-2021
The forecasts of Analistas Económicos de Andalucía indicate that in 2020, the Andalusian GDP may fall between 11.7 and 12.2%. A growth of 6.7% -or 4.1% in a worst-case scenario- is expected in 2021. It should be noted that uncertainty remains high and therefore conditions the preparation of projections.
As for employment, the number of employed is estimated to fall by 4.0% in the year average, standing at c. three million and resulting in a loss of 125,000 workers over 2019, and with the unemployment rate standing at 23.3%. However, in a worst-case scenario, employment could fall by 4.8%, and the unemployment rate could reach 23.7%.
In 2021, the employment would grow by 2% (0.6% in the worst-case scenario), according to the estimations made, with the unemployment rate standing between 24.4 and 25.4%.