Unicaja Banco has published the issue number 25 of the quarterly report ‘Previsiones Económicas de Castilla y León’ (Economic Forecasts for Castilla y León), prepared, as in previous editions, by Analistas Económicos de Andalucía (research company of Grupo Unicaja). As indicated in the report, according to the Castilla y León Regional Accounts, published by Dirección General de Presupuestos y Estadística de la Junta de Castilla y León, the GDP in 2020 has recorded a drop of 7.9%, with a negative contribution from all the demand components, except government consumption. Additionally, according to the latest data published by the Labour Force Survey, employment fell by 2.2% in the year average, with the unemployment rate standing at 11.6% in the fourth quarter of 2020.
For 2021, the estimations made by Grupo Unicaja Banco’s research company suggest that the Castilla y León GDP could grow by 3.5% in the downside scenario and by 5.4% in the upside scenario. An increase of 0.4% in employment is expected, with the unemployment rate standing at 12.9%. In the worst-case scenario, this rate could climb to 13.6%, with practically the same figure of persons in employment.
This report is divided into three sections: 1) Economic environment; 2) Recent evolution of the Castilla y León economy; and 3) Economic outlook for Castilla y León 2020-2021. The first section describes the international and national context. The second section analyses the situation of the Castilla y León economy, paying attention to the evolution of the main indicators, as well as to the productive specialization of the region. Finally, the last section includes outlooks on the forecasts on the evolution of the Gross Domestic Product (GDP) and employment in Castilla y León for 2021.
Global and national economic environment
According to the OECD’s latest report, in the end of 2020 many countries experienced new virus outbreaks, resulting in new curbs to contain the pandemic, intensified in the first months of 2021. Global GDP growth is now projected to be 5.6%. World output is expected to reach pre-pandemic levels by mid-202, if the vaccination goals are achieved and there are not emerging variants of the virus that may worsen the epidemiological situation.
In this context, in the fourth quarter of 2020, the Spanish economy maintained the output levels as in the previous quarter. The year-on-year GDP variation stood at -8.9% (-4.9% in the Eurozone).
A breakdown by components shows that, on the demand side, there was a general decrease, with the exception of government consumption (up 4.5% compared with the fourth quarter of 2019). The drop in exports, higher than 15%, and especially in the case of tourist services, should be remarked. Household consumption has decreased by more than 9%. On the supply side, all activities have registered contractions, except agriculture, government and insurance and financial activities.
For the whole 2020, the Spanish economy has recorded an output decrease of 10.8% (-6.6% in the Eurozone). For 2021, after an upward review, the OECD estimates a 5.7% growth, the highest among the main economies of the Eurozone. The Bank of Spain forecasts a GDP growth of 6.0%, in the central scenario, with higher increases in the second half of the year, underpinned by progress in vaccination deployment and in the implementation of funds linked to the Next Generation recovery funds (NGEU), although part of their positive impact would be reflected in 2022.
Recent evolution of the Castilla y León economy
The latest data from the Quarterly Regional Accounts of Castilla y León, published by the Dirección General de Presupuestos y Estadística de la Junta de Castilla y León, show that the GDP grew by 1.8% in the fourth quarter, vis-à-vis the 15.9% increase in the previous quarter, as a consequence of a worsened health situation in the end of the year that required the re-introduction of curbs on mobility and activity. In y-o-y terms, the GDP fell by 4.0%.
The internal demand deducted 4.3 p.p. to growth. Household consumption fell by 6.9% y-o-y and investment, by 7.3%. Expenditure in government consumption is the only component with an increase (7.0%). The external sector also registers a decrease, both in exports (-7.7%) and imports (-7.5%).
On the supply side, the GDP shows a general q-o-q rise, higher in industry and agriculture. In year-on-year terms, the decrease in the region’s Gross Added Value is due to the falls in construction (-7.5%) and market services (-8.8%), whereas industry and agriculture increase by 3.7% and 8.5% respectively.
In 2020, the Castilla y León GDP has registered a 7.9% reduction (-10.8% in Spain). The primary sector, together with energy and non-market services, are the branches with a highest growth in 2020. On the side of demand, there has been a general decrease, except in public consumption.
With regard to the labour market, the data of the Labour Force Survey (EPA) and Social Security contributions reflect a partial recovery of the employment lost since the start of the pandemic, with 40,323 furloughed (ERTE schemes) as at the end of February.
According to the EPA, in the fourth quarter of 2020, employment in Castilla y León grew by nearly 5,800 people, reaching 976,600. It has to be noted that this figure includes those affected by furlough schemes (ERTE). In year-on-year terms, employment fell by 27,300 people (-2.7%), due mainly to the decline in employees with a definite term employment agreement (-14.1%), as those with an employment contract for an indefinite period have increased by 0.8%. By sectors, employment grows only in construction. The unemployment rate stood at 11.6% (16.1% in Spain).
The number of employees contributing to the Social Security scheme stood in February at 896,543, thus 2.0% less than in the same month of 2020 (-2.1% in Spain). By activity branches, the main decreases are found in hospitality, art activities, industry or shops.
Economic Outlook for Castilla y Leon 2021
The forecasts of Analistas Económicos de Andalucía indicate that in 2021, the Castilla y León GDP may grow by 5.4%, in line with the estimates for Spain. This growth could be lower (3.5%) in a downside scenario. It should be noted that uncertainty remains very high and that the vaccination deployment continues to condition the economic recovery.
As for employment, the number of people in employment is estimated to grow by 0.4% in the year average, reaching 968,500, around 3,800 more than in 2020. Unemployment could grow by nearly 8%, with the unemployment rate standing at 12.9% for the year average. In a worst-case scenario, this rate could reach 13.6%, with employment rate practically identical to the figures of 2020.