Unicaja Banco has published the first issue of the report ‘Previsiones Económicas de Cantabria’ (Economic Forecasts for Cantabria), which will be published every six months and prepared by Analistas Económicos de Andalucía, research company of Grupo Unicaja Banco. As indicated in the report, according to the Quarterly Regional Accounts of the Instituto Cántabro de Estadística (ICANE), in 2021, the Gross Domestic Product (GDP) in Cantabria grew by 5.1%, a figure similar to that of Spain. According to the data published by the Labor Force Survey, employment grew by 4.3% on average in the year, and the unemployment rate stood at 11.5% in 4Q21.
As for 2022, the estimates made by Grupo Unicaja Banco’s research company suggest that GDP could grow by 3.6% for the year as a whole. Likewise, employment is expected to increase by 1.5%, with the average unemployment rate for the year standing at 10.8%.
This report is divided into three sections: 1) Economic environment; 2) Recent evolution of Cantabria economy; and 3) Economic outlook for Cantabria 2022. The first section describes the international and national backdrop and its recent evolution. The second section analyses the situation of the Cantabria economy, with special focus on the evolution of the main indicators, according to the region’s productive structure. Finally, the last section includes forecasts on the evolution of the GDP and employment in the region for 2022.
Global and national economic environment
The international context has changed dramatically with the Russian invasion of Ukraine on 24 February. At the end of last year, the economy was expected to regain momentum as supply conditions continued to normalize and inflationary pressures moderated. However, the invasion will have a significant impact on the economy, which will depend largely on the evolution of the conflict and the impact of economic sanctions.
In a first assessment of this possible impact, the OECD estimates that global economic growth in 2022 will be around 1 percentage point (p.p.) lower as a result of the conflict, with a greater drop in the Euro Zone, while inflation, which was already high at the beginning of the year, could be at least 2.5 p.p. higher. The International Monetary Fund forecasts a global economic growth of 3.6% in 2022 and 2023, i.e., 0.8 and 0.2 p.p. lower, respectively, than in last January forecasts.
The impact of the war will be uneven across countries, and the Spanish economy could be less exposed than others, as it is less dependent on Russian gas and oil. However, the sharp increase in the prices of raw materials and the reduced availability of some of them will affect the different sectors of activity, in addition to the impact of inflation on demand and the effect on exports and tourism of the lower dynamism of our neighboring countries.
The latest data from the Quarterly National Accounts, corresponding to the fourth quarter of 2021, indicate that the Spanish GDP grew by 2.2% (0.3% in the Euro zone), with a year-on-year increase of 5.5% (4.7% in the Eurozone). In the whole 2021, the Spanish economy would have registered a growth of 5.1% (5.3% in the Euro Zone). As for the first quarter of 2022, the Quarterly National Accounts advance estimate indicates that the GDP has registered a quarter-on-quarter increase of 0.3% (0.2% in the Euro Zone), with a decrease in household consumption expenditure. On a year-on-year basis, the GDP increased by 6.4%, with a generalized growth among demand components.
Recent evolution of Cantabria economy
According to the latest data from the Quarterly Regional Accounts of Cantabria, published by the ICANE, in the fourth quarter of 2021, the GDP grew by 1.4% in quarter-on-quarter terms, 0.5 p.p. less than in the previous quarter. On a year-on-year basis, the GDP growth was 5.2% (5.5% in Spain), although output was 1.9% lower than in the fourth quarter of 2019 (-3.8% in Spain). As for the first quarter of 2022, AIReF (Independent Authority for Tax Responsibility) estimates point to a quarterly GDP increase of 0.4% (0.3% in Spain as a whole), registering a year-on-year rate of 4.4% (6.4% in Spain).
On the demand side, private consumption would have slowed in the final part of 2021, affected by the increase in COVID-19 infections and the rise in prices. Retail sales would have decreased at the end of the year in year-on-year terms, although in 2021 as a whole they would have increased by 3.3% (3.2% in Spain). Business investment is expected to have improved, in line with the performance of industrial production of capital goods, the business confidence index and the registration of cargo vehicles. Likewise, the strong growth in housing sales and purchases, with the highest number since 2010, would point to a good performance of residential investment, which has been maintained in the first two months of 2022.
In terms of foreign demand, the value of exports of goods grew at a strong pace in 2021, especially in the first half of the year, increasing by 19.8% in the year as a whole compared to 2020 (20.1% in Spain) and registering the highest value in the historical series (which began in 1995). By sectors, the growth of exports has been generalized, with the exception of the sector of foods and drinks, and with a significant increase in raw materials or semi-manufactured goods. The latter sector and capital goods account for almost 60% of the value of Cantabria exports.
From the supply side, the quarterly increase in GDP in the fourth quarter of 2021 responds to the increase in value added in construction (3.9%) and in the services sector (1.6%). In year-on-year terms, the growth in production was mainly due to the increase in services (6.1%) and in industry (4.5%). Construction reported a more moderate growth (1.6%), while the agricultural sector reported a decrease of almost 6%.
In 2021 as a whole, the Cantabria economy would have grown by 5.1%, a rate similar to that of the Spanish economy, after a decrease of nearly 10% in the previous year. The agricultural sector would have experienced a reduction in added value of 6.7%, decreasing to a lesser extent in construction (-0.2%), while it would have increased in industry (6.4%) and services (5.3%).
With regard to the labor market, employment showed a growing trajectory throughout 2021, although of less intensity in the final stretch of the year, considering both the Labor Force Survey and Social Security figures, so that pre-crisis levels would have been practically recovered. In the case of workers under the Social Security scheme, in December (221,637 workers) there were almost 2,680 more than in the same month of 2019, which meant a growth of 2.9% in year-on-year terms (lower than the national average), which has intensified in the first months of 2022 (3.6% in April), although it should be remembered that the third wave of the pandemic was recorded at the beginning of 2021.
According to the Labor Force Survey, in the fourth quarter of 2021, employment in Cantabria grew by 2.1% year-on-year (4.3% in Spain). Data for the first quarter of 2022 show a slight increase in employment compared to the end of 2021, due to growth in agriculture and, to a lesser extent, in construction. In year-on-year terms, there has been a growth of 1.8% (4.6% in Spain), with a significant increase in market services. The number of unemployed fell by 11.1%, with a slight increase in the labor force, which brought the unemployment rate to 10.5% (13.6% in Spain).
Economic Outlook for Cantabria 2022
The forecasts of Analistas Económicos de Andalucía, research company of Grupo Unicaja Banco, indicate that in 2022, the GDP in Cantabria could grow by 3.6%. However, there is a high uncertainty, especially with regard to the evolution of the conflict in Ukraine, but also in relation to the trajectory of prices or bottlenecks in supply chains, not to mention the evolution of the pandemic, so that making projections at this time involves a high degree of complexity.
It is also estimated that, on average for 2022, the number of employed persons according to the Labor Force Survey could grow by 1.5%, due mainly to the increase in employment in services. The number of unemployed could fall by 4.5%, which would bring the unemployment rate to 10.8% on average for the year (some 3.3 p.p. below the national average).