Unicaja Banco has published the issue number 27 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. As indicated in the report, the estimates made by Grupo Unicaja Banco’s research company suggest that the regional GDP could grow in 2021 by 5.2%, whereas employment could grow by 0.8%, with the unemployment rate standing at 12.2%.
For 2022, the estimates point to higher growth of activity and employment. The GDP could grow in the year by 5.4%. With regard to employment, an increase of 1.3% is expected, with the unemployment rate falling to 11.7%.
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 2021-2022. The first section describes the international and national backdrop. The second section analyses the situation of the Castilla y León economy, with special focus on the evolution of the main indicators and on 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 the region for 2021 and 2022.
Global and national economic environment
The economic activity continues to recover at a global scale. According to the OECD’s latest report, the global economy is expected to grow by 5.7% this year and by 4.5% in 2022.
The increase in demand has pushed up prices in commodities and food, whereas the disruption to supply chains has added to cost pressures, resulting in inflationary pressures that should eventually fade.
The projections made by the different international bodies indicate that the Spanish economy will be among those with a highest growth in 2021. The Bank of Spain, in its latest projections, expects for this year a GDP growth of 6.3%, and of 5.9% in 2022, an upwards review of 0.1 p.p. However, the National Statistics Institute (INE) has revised downwards the growth of the second quarter, from the 2.8% published in the end of July advance, to 1.1% in September (17.5% year-on-year), which will have an effect on the growth projections made before this publication.
Recent evolution of the Castilla y León economy
According to the latest data from the Quarterly Regional Accounts published by Dirección General de Presupuestos y Estadística de la Junta de Castilla y León, in the second quarter of 2021, the regional GDP has grown by 1.2% (1.3% decline in the first quarter). Compared to the second quarter of 2020, the GDP has grown by 17.8%, although production remains 4.1% below the figure of the fourth quarter of 2019 (-8.8% in Spain without seasonality and calendar effect).
The contribution of the internal demand has been of 17.4 p.p., compared to -1.3 p.p. in the previous quarter. In y-o-y terms, household consumption has increased by 18.7% and investment has grown by 25.1%. Expenditure in government consumption has continued to grow (3.3%). The external sector made a positive contribution of 0.4 p.p., due to the higher increase in exports of goods and services (21.9%) than in imports (19.3%).
On the supply side, there has been a general increase, with the exception of the agricultural sector (-4.2%), which posted the highest growth in 2020. Both industry and market services have recorded an increase over 20%, with construction reaching a growth slightly over 10%.
With regard to the labour market, the data of the Labour Force Survey (EPA) and Social Security contribution figures reflect a recovery of the employment in the second quarter of the year, although below the levels of 2019,
According to the EPA, in the second quarter of 2021, employment in Castilla y León grew by 1.0%, reaching 965.100 people. In year-on-year terms, employment grew by 4.1%, with significant increases in the agricultural sector (17.5%) and non-market services (6.7%). Unemployment has grown by 6.4% and the unemployment rate stands at 12.6% (15.3% in Spain).
Economic Outlook for Castilla y León 2021-2022
The forecasts of Analistas Económicos de Andalucía indicate that in 2021, the regional GDP could grow by 5.2%, 0.2 p.p. less than in June forecast, due to the slightly lower than expected growth in the second quarter. With regard to demand, private consumption and investment would post a growth of 5.4% and 7.5% respectively, whereas, on the supply side, a general increase is expected, except in the agricultural sector (-2.9%), and especially remarkable in industry (6.3%) and services (5.4%).
As for employment, the number of people in employment is estimated to grow by 0.8% in 2021 average, reaching 972,000 people, some 7,300 more than in the 2020 average. Unemployment would increase by 2.5%, and the unemployment rate would stand at 12.2% in the year average.
With regard to growth projections for 2022, the estimates reflect that the regional economy could grow by 5.4%, recovering the production levels that it had before the pandemic. However, there are still some downward risks.
A growth of 5.3% in private consumption is estimated for the next year, as well as a 7.5% increase in investment and a better contribution of the external balance. Additionally, the increase will be general in all the sectors, with higher rates for construction (6.1%) and services (5.6%). The number of people in employment would grow by 1.3% in the year average for 2022, and the unemployment rate would stand at 11.7%.