Unicaja Banco has published the first issue of the report ‘Previsiones Económicas de Castilla-La Mancha’ (Economic Forecasts for Castilla-La Mancha), 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 estimations of AIReF (Independent Authority for Fiscal Responsibility), in 2021 Castilla-La Mancha’s Gross Domestic Product (GDP) grew by 5.3% (5.1% in Spain). According to the data published by the Labor Force Survey, employment grew by 6.1% on average in the year, with the unemployment rate standing at 13.3% in the last quarter of 2021.
In 2022, the estimations made by the research company of Grupo Unicaja Banco indicate that the GDP could grow by 4.0%. With regard to employment, an increase of 2.0% is expected, with the unemployment rate standing at 14.6% in the year average.
This report is divided into four sections: 1) Economic environment; 2) Recent evolution of Castilla-La Mancha economy; 3) Economic outlook for Castilla-La Mancha 2022 and 4) Provincial analysis. The first section describes the international and national backdrop and its recent evolution. The second section analyses the situation of the Castilla-La Mancha economy, with special focus on the evolution of the main indicators, according to the region’s productive structure. The third section includes forecasts on the evolution of the GDP and employment in the region for 2022. Finally, the last section focuses on the analysis of the evolution and economic outlook of Castilla-La Mancha provinces.
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 Castilla-La Mancha economy
According to AIReF estimates, in the fourth quarter of 2021, the GDP of Castilla-La Mancha would have grown by 1.2% in quarter-on-quarter terms, 0.6 p.p. less than in the previous quarter. In year-on-year terms, the GDP growth was 3.3% (5.5% in Spain), although output would be 1.2% lower than in the fourth quarter of 2019 (-3.8% in Spain). As for 2021 as a whole, the regional economy would have grown by 5.3% (5.1% in Spain), following a decline of nearly 8% in the previous year. Estimates for the first quarter of 2022 point to a quarterly GDP decrease of 0.2% (0.3% in Spain), registering a year-on-year rate of 3.6% (6.4% in Spain), being one of the regions that is closer to pre-pandemic levels, according to the figures of this agency.
In terms of its composition, from the side of demand, private consumption would have shown a certain slowdown in the final stretch of 2021, affected by the increase in COVID-19 infections and the upturn in prices, with retail sales growing by 0.8% for the year as a whole (3.2% in Spain). Business investment is expected to have improved, as indicated by the performance of industrial production of capital goods and the improvement in business confidence. Likewise, the strong growth in home sales and purchases, with the highest number since 2008, would point to a good performance of residential investment, which would have been maintained in the first months of 2022.
Regarding foreign demand, the value of exports of goods from Castilla-La Mancha grew at a strong pace in 2021, increasing by 24.8% compared to 2020 (20.1% in Spain) and registering the highest value in the historical series (started in 1995), maintaining this momentum in the first two months of 2022. The growth of exports in 2021 was generalized, with significant increase in foreign sales of pharmaceutical products, aluminum and plastic materials, and with a more moderate increase in exports of beverages (wine), which account for 18.5% of the national total.
From the supply perspective, activity would have been recovering throughout 2021 in all sectors, with particular intensity in services, the most affected in 2020 by the health crisis. Turnover in the services sector grew by just over 14%, recovering to pre-pandemic levels, something that has not occurred at the national level, although branches such as hospitality are still below those levels. For its part, industrial production also improved in the past year, although in this case it continues to be lower than in 2019, with growth moderating throughout the first quarter of this year, especially in the production of consumer goods and intermediate goods.
Regarding the labor market, employment showed a significant growth rate throughout 2021, attending both the Labor Force Survey figures and contributions to the Social Security, recovering the levels prior to the health crisis. In the case of workers under the Social Security scheme, in December (749,007 workers) there were around 35,000 more workers than in the same month of 2019, which meant a growth of 4.3% in year-on-year terms (slightly higher than the national average), which has intensified at the beginning of 2022 (4.9% in April), although it should be remembered that at the beginning of 2021 the third wave of the pandemic was being recorded.
According to the Labor Force Survey, in the fourth quarter of 2021, the number of employed persons in Castilla-La Mancha grew by 5.8% in year-on-year terms (4.3% in Spain), maintaining the momentum of employment in the first quarter of 2022. In this period, there has been a decrease in employment with respect to the end of 2021, sustained by the lower number of employed in market services and industry. However, in year-on-year terms there has been an increase of 5.3%, with a generalized increase by sectors, more pronounced in agriculture and market services. The number of unemployed fell by 16.9%, with an increase in the labor force, bringing the unemployment rate to 14.3% (13.6% in Spain).
Economic Outlook for Castilla-La Mancha in 2022
The forecasts of Analistas Económicos de Andalucía, research company of Grupo Unicaja Banco, indicate that in 2022, the regional GDP could grow by 4.0%, around 0.3 p.p. less than average for Spain. 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 2.0%, due mainly to the increase in employment in services. The number of unemployed could fall by 6%, which would bring the unemployment rate to 14.6% on average for the year (some 0.5 p.p. above the national average).
In a detailed analysis by provinces, in the fourth quarter of 2021 there would have been an increase in activity in all the provinces of Castilla-La Mancha, with Guadalajara (4.2% in year-on-year terms) and Toledo (4.0%) registering higher increases than the average for the region (3.3%), according to estimates of the Synthetic Indicator of Economic Activity of Analistas Económicos de Andalucía, although these rates would not be strictly comparable.
In 2021 as a whole, growth above the average of Castilla-La Mancha (5.3%) is estimated in Guadalajara (5.9%) and Toledo (5.8%).
As for 2022, the forecasts indicate that economic growth will range from 3.1% in Albacete and 4.9% in Toledo, with the province of Guadalajara (4.7%) also growing above the regional average (4.0%).