Catalan economy keeps exceeding forecasts
Chamber of Commerce presents revised report predicting GDP growth of 3.1% and labels threats to cut off funding to Catalonia “not viable” as an option for Spanish government
The Catalan economy keeps growing. In the second quarter of the year it grew 0.9% over the first quarter. With this encouraging data, the Chamber of Commerce presented its revised summer report on Tuesday in Barcelona, with the forecast for GDP growth in 2017 up from 2.8% to 3.1%, and up three decimal points for 2018 from 2.4% to 2.7%.
The Chamber of Commerce president, Miquel Valls, also pointed out that the upward revision of the forecasts for Catalan GDP is the fourth in a row, which shows the positive trend of the economy in Catalonia. The Chamber report suggests that the dynamic growth of the Catalan economy is based on three clear factors: the dynamism of the external sector, strong job creation and the recovery in investment. Catalan exports have also benefited from reactivation of international trade in the first five months of the year. Sales abroad have gone up by 10.4%, which is one of the highest percentages for a term in past few years, said Valls.
Besides the good performance of business abroad, the tourist sector has also made a positive contribution to the economy. Overnight stays reached record highs, thanks to an increase in overnight stays by foreign tourists of 9.6% in the first term of the year.
Strong job creation is also contributing to an increase in consumer revenue, in spite of the moderation in salaries affecting the whole job market. In particular, the rate of contributors to Social Security rose from 3.8% in the first quarter to 4% in the second quarter, three decimal points higher than the figures registered in the rest of Spain. Finally, an important recovery in investment can be observed, especially in the construction sector.
Risk factors “vanishing”
According to the Chamber of Commerce, the risk factors that posed a possible threat to the Catalan and international economy some months ago are “vanishing”. An example is the fears that US President Donald Trump would introduce protectionist policies, while another is the defeat of populist movements in recent European elections.
In spite of the elimination of a large part of the threats to the economy, the issue of the Catalan political process ending in a unilateral referendum on October 1 does worry the head of the Chamber. Valls said he was not sure what effects the referendum could have. However, as the economy is doing well, Valls pointed out that it was difficult to foresee political factors affecting its positive performance. Nevertheless, the organization’s president stressed the fact that there was great uncertainty about the future development of the Catalan economy given the current political context.
Cutting funding to Catalonia not viable
As for the threats by the Spanish government to cut funding of the Catalan government if money from the budget is spent on preparations for the referendum, Valls ruled out the possibility, given the strong relationship between the Catalan and Spanish economies. The president of the Chamber added that funding cannot be cut in Catalonia when ''the debts of the Catalan economy are Spain’s debts.” It is for this reason that “the financial markets are not reacting as if worried by this threat,” he added.
200,000 new jobs by 2018
Another positive development that stands out in the Chamber report is employment. The Catalan economy is expected to generate 200,000 new jobs this year and in 2018, to an employment total of 3.79 million workers by the end of next year, a figure similar to the one registered in 2009, when there were 3.8 million people in work. Yet, the figure of 3.79 million employees in 2018 still does not mean a return to the employment situation in Catalonia before the crisis began in 2008, when employment reached four million employees.
In relation to higher salaries, Valls linked any rise in wages to an increase in productivity and pointed out that economic development, which is increasingly more globalized and increasingly more digital, obliges companies to employ specialised workers in order to improve productivity and so be able to compete on the international stage.