Catalan GDP will grow 1.1% in 2011 and 1.6% in 2012 according to CatalunyaCaixa

Barcelona (ACN).- The Studies Services of CatalunyaCaixa has released a more optimistic forecast on the evolution of the Catalan economy in the current and coming years. In January, the savings bank stated that the Catalan economy would grow between 0.7% and 0.8% in 2011, but six months later, a new study corrects and improves the forecast. The Catalan GDP will grow by 1.1% in 2011, considering the very positive trend of the exports sector, which has reached a historical record. The tourism sector will also be an important economic engine, as 16.5 million people are expected to visit Catalonia in 2011. The new figures coincide with the Spanish Government’s predictions but they are not backed by other studies, which set the expected growth for 2011 below 1.1%. CatalunyaCaixa’s analysis states that the Catalan economy would have grown at a 2% rate in 2011 if the public sector budget cuts would have not taken place. In addition, growth in 2011 and 2012 will not be reflected by a drastic unemployment reduction, which will fluctuate around 18%. Joan Oliver, Applied Economics Professor at the Autonomous University of Barcelona and Coordinator of the CatalunyaCaixa study, stated that “if the situation in Europe is maintained, in three years time the Catalan economy will be able to come back to a 3% GDP growth, which is what this economy is able to grow, although we are having problems getting back to this moment in the cycle”. According to Oliver, in 2014, Catalonia would grow at a 3% rate.

When the Spanish Government stated at the end of last year, and in the first months of 2011, that Spain would grow at the end of 2011 at a 1.3% rate, a rate that would also be shared by the Catalan economy, all think tanks and studies services from financial institutions, including those at international level, questioned the Government’s predictions for being “too optimistic”. CatalunyaCaixa also shared this pessimistic view and in January it predicted an economic growth of Catalonia’s GDP between 0.7% and 0.8% for 2011. However, six months later, it released its six-month study and corrected the previous forecast.

This Tuesday, the Director of CatalunyaCaixa’ Studies Service, Xavier Segura, and the Applied Economics Professor at the UAB, Joan Oliver, presented the savings bank’s last analysis and forecast for the Catalan economy: ‘L'informe semestral. Situació i perspectives de l'economia catalana’ (‘The semester report. Situation and perspective of the Catalan economy’). Catalan GDP will grow 1.1% in 2011 and 1.6% in 2012, “leaving behind the worst crisis” stated Oliver. Catalan GDP would even reach 3% growth in 2014.

The reason for these changes can be based in the good behaviour of Catalan exports, which reached an historical for the first quarter of 2011. “Catalonia is exporting 50,000 million euros per year, and in absolute terms, the last quarter we overtook the historical record [for a three-month period]” explained Oliver. These figures demonstrate the good health of the industrial sector, which has done its homework and is already going through a clear recovery.

Employment will last to recover

Despite the more positive perspectives for economic growth, unemployment will remain high and virtually no new jobs will be created in 2011 and 2012. Despite the economic growth of 1.1% in 2011 and 1.6% in 2012, unemployment will stagnate and remain at 18.2% and 17.9% respectively. The 400,000 jobs lost since 2007 will not be fully recovered until 2016 or 2017, Oliver stated. He recognised that employment will suffer the worst effects of the crisis and will be the economy’s dead weight. Services is the economic sector that can create most of the new jobs, and it will create some 40,000 in 2011, but they are not enough to counteract those lost in other sectors, mainly in construction. The industrial sector will also create jobs in 2011, and it will be the first to recover from the recession. However, its weight is too small and not as many industrial jobs have been destroyed in order to have the capability to create enough jobs and drastically reduce unemployment. In 2012, the employment recovery will start, led by the services sector, but very slowly, at a 1% rate.

An overall perspective of “a slow recovery” in the economy, combined with weak internal consumption, conditions around 60% of Catalonia’s GDP, and therefore economic growth beyond 2% is discarded in the immediate term. Such growth would enable the creation of jobs.

The Catalan economy’s forecast is conditioned by the Greek crisis’ evolution

The good perspectives for Catalonia’s economy are conditioned by Greece not suffering an economic meltdown, therefore going through a controlled solution process of its crisis regarding its debt. In other words, Catalonia will be on the path to recovery only if the Eurozone does not go through an extremely unstable period. However, Oliver considers this situation as unlikely, due to the response of the European Union and considers that the Greek crisis is “in the process of being solved”.

The current Greek crisis slows down the Catalan recovery

The Greek crisis has put Southern European countries in the market spotlight. Although Spain has a relatively small public debt compared to other countries such as Italy, the United Kingdom or even Germany, the Spanish debt needs to pay much higher interest rates. In addition, markets are demanding severe budget adjustments, which are translated in Catalonia in great budget cuts (a 10% budget cut in 2011). The Catalan economy is therefore “absorbing” the negative factors “of an unusual crisis”, explained Oliver, the worst crisis the Catalan economy has suffered since historical data has been gathered. He stated that without the budget cuts imposed by the markets, the Catalan economy would have grown 2% in 2011.

Oliver stressed that the unemployment reduction announced yesterday by the Spanish Ministry of Employment could have been higher if the international context was more stable and entrepreneurs were not constantly listening to the European economy and the rumours of a Euro collapse. This uncertainty and alarmism is slowing down Catalonia’s economic recovery, as well as many other European economies, according to Oliver.