Unicaja Banco has published the issue number 30 of the report ‘Previsiones Económicas de Castilla y León’ (Economic Forecasts for Castilla y León), prepared, as in previous editions, by Analistas Económicos de Andalucía and which is now be published every six months. As indicated in the document, the estimations of the research company of Grupo Unicaja Banco point to a regional Gross Domestic Product (GDP) growth of 3.0% in 2022, whereas employment could grow by 2.8%, with an estimated unemployment rate of 10.4% in the year average.
For 2023, the forecasts suggest that the Castilla y León GDP could grow by 1.0%. With regard to employment, an increase of 0.8% is expected for the year average, with the unemployment rate standing at 10.2%.
This report is divided into four sections: 1) Economic environment; 2) Recent evolution of Castilla y León economy; 3) Economic outlook for Castilla y León 2022/2023 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 y León 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 and 2023. Finally, the last section focuses on the analysis of the evolution and economic outlook of Castilla y León provinces.
Global and national economic environment
Continuing the trend that began in the second half of 2021, during the last quarter there has been a remarkable loss of momentum in activity on a global scale, as a result of a series of adverse factors that interact with each other, among which, undoubtedly, the increase in prices, which has exceeded the worst expectations, stands out for its importance. In response to the strong inflationary pressures, more persistent and higher than expected, the main Central Banks, in their attempt to anchor inflation expectations to their medium-term objectives, have maintained or intensified the tightening of monetary policy, deploying the full range of available instruments.
According to the latest forecasts published by the International Monetary Fund (IMF), the world economy is expected to register an increase in output of 3.2% in 2022. In 2023, the GDP growth rate is expected to moderate to 2.7%.
In the specific case of the Eurozone, in the second quarter of the year, quarter-on-quarter growth of 0.8% was recorded, 0.1 percentage points (p.p.) above the previous quarter, while in September the increase in prices was around 10%. IMF forecasts point to GDP growth of 3.1% and 0.5% for 2022 and 2023, respectively. On the other hand, the increase in consumer prices is quantified at 8.3% for 2022 and 5.7% for 2023.
However, these forecasts are subject to extraordinary uncertainty, given the existence of important sources of risk that could bias them downward for activity, stoking fears of a recession, and upward for inflation.
With regard to the Spanish economy, the data from the Quarterly National Accounts of INE (National Statistics Institute), corresponding to the second quarter of 2022, show that the Spanish GDP grew by 1.5% (0.8% in the Euro zone), supported by both domestic demand and the foreign sector, after falling by 0.2% between January and March. In year-on-year terms, GDP growth stood at 6.8% (4.1% in the euro zone), with a positive contribution from domestic demand (1.9 percentage points) and especially from the foreign sector (4.9 percentage points), with an outstanding growth in services exports and, more specifically, in tourism services.
Recent evolution of Castilla y León economy
According to the latest data from the Quarterly Regional Accounts, published by the Dirección General de Prespuestos y Estadística of Junta de Castilla y León, in the second quarter of 2022, the GDP grew by 2.3% quarter-on-quarter (-2.0% in the previous quarter), supported by the domestic demand, especially private consumption. In year-on-year terms, the growth in production stood at 5.0%, exceeding the pre-pandemic levels.
On the demand side, year-on-year growth have been registered in all components, with household consumption growing by 3.8% and investment by 2.8%, with domestic demand contributing 3.8 percentage points to regional growth. The contribution of the external balance was 1.2 p.p., due to the higher growth of exports than imports (4.1% and 2.0%, respectively).
On the supply side, the decline in GDP in the first quarter of the year was due to the fall in Gross Value Added (GVA) in construction and services, while in the second quarter there were increases in industry and services. In year-on-year terms, it is the services sector (7.6%) that made the greatest contribution to growth, with the increase in commerce, transport and hotels and restaurants (19.8%) standing out. Construction grew by 3.1% and industry by 0.2%, while agricultural GVA decreased by 5.0%.
With respect to the labor market, both the figures of the Regional Accounts and those of the Labor Force Survey (EPA) and Social Security enrollment show a significant rate of growth in employment in the first half of 2022, recovering the pre-pandemic levels. However, the latest published data on workers under the Social Security scheme reflect a certain slowdown in job creation.
According to the EPA, in the second quarter the number of employed persons reached 1,007,300, an increase of 20,500 over the previous quarter, mainly due to the increase in non-market services and the agricultural sector. In year-on-year terms, employment grew by 4.4%, with more than half of this increase occurring in market services. The labor force continued to grow, at a similar rate to the first quarter of the year, and the number of unemployed decreased again, reducing the unemployment rate to 10.2% (12.5% in Spain), around 2.5 percentage points lower than a year earlier.
Economic Outlook for Castilla y León 2022-2023
The forecasts made by Analistas Económicos de Andalucía suggest that GDP in Castilla y León could grow by 3.0% in 2022 as a whole, a lower rate than that forecast for Spain as a whole and than that estimated last March. As for 2023, the growth rate could moderate to 1.0%, in a context of high uncertainty in which the risk of recession has increased for the main world economies.
On the other hand, the number of employed persons (according to EPA figures) is estimated to grow by 2.8% in the average of 2022, more than previously estimated, given the higher-than-expected growth in the first half of the year. Likewise, the number of unemployed could fall by around 8%, which would bring the unemployment rate in the average of the year to 10.4%, 1 p.p. below that of 2021. In 2023, the number of employed persons is expected to increase by 0.8%, while the reduction in unemployment is expected to moderate, with an estimated unemployment rate of 10.2%.
In a breakdown of the analysis by provinces, according to the estimates of Analistas Económicos de Andalucía Activity Synthetic Indicator, the economic activity would have increased in all provinces in the second quarter of 2022, with the highest rates in Salamanca (5.6% y-o-y), Burgos (5.3%), León (5.2%) and Avila (5.2%).
As for 2022 as a whole, Analistas Económicos de Andalucía estimates growth rates that could range from 2.2% in Palencia to 3.5% in Salamanca, with the provinces of Segovia (3.4%), León (3.3%), Ávila (3.2%) and Burgos (3.1%) also growing above 3%.