spanish economy

Rating agency Moody’s warns that Catalan independence from Spain might have “a major adverse impact on Spain’s economy” but also that “Catalonia itself could also suffer” if the break–up is not friendly. In a forecast about the Spanish economy published this week, the New York-based company analyses potential risks that might damage the expected economic recovery. Moody’s praise the high level of exports, based on a higher competitiveness reached by lowering salaries. However, the report, signed by Zach Witton, highlights that “debt reduction by households and businesses, elevated unemployment, the housing market correction, and tight credit will drag on growth”.

By the end of December, Catalonia registered a 0.2% annual inflation rate, according to the Spanish Statistics Institute (INE). This figure is the lowest recorded in Catalonia at the end of the year since December 1978, when the INE started providing figures for each of the Autonomous Communities. In the whole of Spain, prices ended 2013 posting an annual inflation rate of 0.3%, the lowest registered on a month of December since 1961; the very year such figures started being released. However, these are not the lowest annual inflation rates, since the record was set in July 2009, with a -0.9% annual rate in Catalonia. In monthly terms, prices increased by 0.2% in December in Catalonia on November figures and by 0.1% in the whole of Spain. The price increase was mostly due to the growth in oil prices, while leisure, culture and clothing helped minimising the general increase.

The “very moderate” growth expectations for 2014, between 0.5% and 1%, will make it “difficult” for the unemployment rates to fall below the current 27%. This was the conclusion of the 2014 Economic Report of Barcelona-based ESADE, one of the top business schools in the world. The main author of the report stressed that this “slow and costly” growth should contribute only in a “very reduced” way to creating new jobs in 2014. However, he also explained that the Labour Market Reform would have positive effects on employment levels in the medium and long term. The study indicates that consumption in 2014 will “remain restricted” due to the high unemployment rates and reduced wages.

Next to the Spanish Prime Minister Mariano Rajoy (who went to the White House), the President of the United States, Barack Obama, did not talk about Catalonia despite being asked about it directly by a journalist. Obama did not repeat the formula expressed by other international leaders – it is Spain’s internal matter – but instead preferred to avoid the issue. He did not explicitly back the Spanish PM, despite the fact that Rajoy had stated, only a few minutes earlier, that “Catalonia’s independence will not happen”. Rajoy’s meeting with Obama and the following press conference at the White House were also controversial because the Spanish Government banned several media that were covering the trip and only allowed one Catalan newspaper to attend it.

Catalonia has confirmed its fourth place in the Autonomous Community rankings of GDP per capita, according to figures released by the Spanish Institute of Statistics (INE). This data from 2012 reveals that the Basque Country is still the leading area in Spain, followed by the region of Madrid and Navarre. The figures indicate that the GDP per capita of Catalonia amounted to €26,412 in 2012, meaning 0.7 % less than in 2011. In 2012, the wealth generated by the Catalans totalled €192,535 million, 18.7 % of the Spanish GDP, above the 2011 figures when Catalonia contributed to 18.6 % of the Spanish economy.

Juan Rosell, the current Chairman of Spain’s main association of employers (CEOE), and who used to chair the main Catalan employers association, stated that Catalan businesspeople are shifting towards pro-self-determination stands. Rosell, who is openly against Catalonia’s independence, stated that “business people are not aliens” and “if society has changed its views in the last few years, so have businesspeople”. The top representative of Spanish business-owners stated that the current moment is “extremely serious”. Rosell demanded to “bridge the gap, put all the economic data on the table and analyse the pros and cons for one side and the other one” regarding Catalonia’s independence from Spain. Rosell asserted that companies have not left Catalonia due to the self-determination process.

Housing prices increased by 0.8% in Catalonia during the third quarter of 2013, which is the first quarterly increase in the last three years. However, despite the positive figures, in annual terms prices at the end of September were 8.1% lower than those registered 12 months ago, due to the price falls registered in the second half of 2012 and the first 6 months of 2013. Between July and September 2013, prices of newly-built flats and houses in Catalonia rose by 5.7%, while those of second-hand housing were still decreasing (-0.3%). However, overall figures suggest that the real estate market may have reached the bottom and that its recovery might be about to start. In the whole of Spain, housing prices rose by 0.7% in the third quarter of 2013.

Speaking to the Economic Affairs Committee of the European Parliament, the European Commissioner for Employment, Lázló Andor, said that Spain should profit from its decentralised organisation to help fight youth unemployment. He suggested that the rest of Spain’s Autonomous Communities should follow the examples of Catalonia and Navarra to improve employment levels among youngsters. The European Commissioner said that Spanish authorities should take note of the plans launched by Catalonia and Navarra, where the youth unemployment situation “is better than the national average”. However, despite these levels being lower than in most of Spain, youth unemployment in Catalonia is worryingly high, at more than 53% in July.

According to the Catalan Institute of Statistics (Idescat), Catalonia’s economy grew by 0.1% between July and September. For the first time in 9 quarters, the Catalan economy is growing again, leaving behind the technical recession. However, in annual terms, Catalonia’s GDP has not recovered yet and at the end of September it posted a 0.6% decrease on data from September 2012. Besides, the Spanish Institute of Statistics (INE) confirmed that the Spanish Economy also grew by 0.1% in the third quarter of the year, a figure which had been advanced last week by the Bank of Spain. In annual terms, the Spanish economy dropped by 1.2% compared to data from September 2012.

This October, prices are 0.1% cheaper than they were a year ago, in October 2012, according to the advanced inflation rate released by the Spanish Statistics Institute. If this is confirmed, annual inflation rate would have gone from +0.3% in September to -0.1% in October. Prices of food and non-alcoholic drinks fell and the increase in university education fees was slight. Last year, university tuition fees doubled as one of the austerity measures adopted to reduce public deficit. Regarding monthly changes in the overall inflation rate, prices increased by 0.4% between September and October.

At Spanish level, unemployment increased both in monthly and annual terms. Catalonia is the Autonomous Community with the largest annual unemployment drop in absolute terms and the second highest in relative terms. The number of people registered as unemployed in Catalonia at the end of September dropped by 11,546 individuals compared to figures from a year ago, representing a 1.83% annual decrease. However, in monthly terms, registered unemployment increased by 1.51%, with 9,243 more jobseekers. September is a month with a traditional unemployment increase due to the end of summer season contracts. Last September’s unemployment increase was the lowest since 2008.

Since January, 8.7 million foreign visitors have come to Catalonia, a rise of 5.1% on the same period of 2012. Catalonia has become the main tourist destination in the whole of Spain during July, with 2.1 million foreign visitors, according to a survey carried out by the Institute of Touristic Studies. This figure represents a 3.1% rise on July 2012. Catalonia now receives 26.7% of Spain’s total international tourists. French tourists account for the largest share, with an increase of 1.9% on last year, representing a third of all foreign tourists. However, it is Russians that have contributed most to this significant growth. Spain as a whole received 34 million tourists since January, with July setting a new record.

The Spanish Deputy Minister for Trade, Jaime García Legaz, acknowledged on Thursday that Catalonia is the “main exporting community” within Spain. Between January and July, Catalonia’s exports had a value of €29.23 billion, representing 24.6% of Spain’s total in that period. During his speech, García Legaz failed to confirm the statement made by Madrid’s regional Government that more than 1,000 Catalonian companies have moved to Madrid since 2010. He insisted that he lacks “reliable data” on this issue and is therefore “not in a position to make an informed judgement”. A total of seven Autonomous Communities within Spain have experienced an increase in their exports this year.

By the end of July there were 6,859 fewer people registered at the Catalan Public Employment Service (SOC) than a month ago, which leaves the total number of registered unemployed individuals at 610,429. The current amount of jobseekers is now the same level as September 2011. Unemployment levels have been decreasing in Catalonia for the last five consecutive months. In addition, last July’s drop is the most significant reduction in this month of the year since 2010. In the whole of Spain, the unemployment rate decreased by 1.36%, with 64,866 fewer people registered at the Public Employment Service offices. This means that by the end of July there were 4,698,814 individuals registered as unemployed in Spain. The Catalan Government states that, if the trend is kept during the second semester, the economic crisis would have reached “its lowest level” earlier this year.

On Friday, the Spanish Government approved a proposal of law strengthening market unity, officially aiming to simplify the bureaucratic and legal framework in which companies operate. However, the Catalan Executive fears Madrid’s reform does not really aim to boost the economy and help companies, but to recentralise power. Barcelona thinks that the new proposal “radically modifies” the current distribution of competences on economic regulation and it aims to recentralise power. The Catalan Government hopes that the definitive law will be significantly changed in relation to the current proposal, as otherwise Barcelona will totally oppose the initiative. Catalonia is critical of the current proposal and accuses it of “homogenising the Autonomous Communities”.