The expected slowdown in the Valencia Community economy for the next year will have direct consequences for both the labor market and growth forecasts. And according to the latest BBVA Research status report, Employment will be practically stagnant throughout 2023, in a slowdown dynamic, which will mean that autonomy does not improve pre-pandemic activity levels until the end of that year. Inflation and high interest rates are the factors that affect these forecasts the most due to their impact on consumption.
Rafael Doménech, Head of Economic Analysis at BBVA Research, and David Conde and Carlos Rodríguez, regional and regional East directors of BBVA, presented the latest status report on the Valencian Community on Tuesday. After recording an increase of 5.8 percent in 2021, the growth of the economy in the autonomous region will remain at 4.3 percent this year, and next workout will be reduced to 0.7%while the initial estimate was 1.8%.
According to the report, growth was higher than national in the first two quarters of the current year, but things have already started to go wrong in the third quarter because slowdown in consumption growthespecially in sectors more linked to tourism. Everything indicates that this downward trend will continue in this final period of 2022 and into the next year due to worsening expectations due to inflation and rising interest rates.
The report’s authors emphasize that after crossing two digits in June, inflation peaked and began to slow in the region, as evidenced by a decline of up to 9% relative to the national barrier. But despite this improvement, it will stay higher for a while and will increase both wages and costs.
The document also highlights that the wage increase agreed in the agreement has been on the rise in recent months, although yes, below inflation. However, attention is also drawn to the fact that seven out of ten collective agreements are usually signed in the second half or first months of each year, and more significant increases are expected as time goes on. Autonomous communities that specialize in the production of exportable goods and have a greater number of unfilled vacancies are the ones that accelerate wage growth the most and, they emphasize, expose them to greater losses in competitiveness. In this sense, the Community of Valencia will be among the regions where salaries have increased the most. In fact, the report highlights: The shortage of skilled labor is getting worseespecially in sectors such as new technologies, accommodation or transportation, among others.
In employment, the increase was 2% in 2021 and is expected to be 3.8% in 2022. But for next year estimate is only 0.4%this would leave the unemployment rate at 13.9%. Despite this expected recession for next year, the document highlights that 87,000 jobs will be created in the Community during these three years.
The GDP growth forecast for the next year is three-tenths below the national average. This negative difference with Spain, worse prospects for tourism, especially abroad, as a result of the decline in European demand. Rafael Doménech emphasized that the past summer was “extraordinary” for the industry, after two years of hardship due to covid, adding that this has led to “unprecedented spending levels”. The problem, according to the person in charge of Economic Analysis at BBVA Research, is that inflation affects purchasing power in countries like Germany, France, Italy or the United Kingdom, where most tourists pass through the Valencian Community. they come from the province of Alicante in general and specifically, so trips will suffer.
Actually, Card-to-face spending is already falling in AlicanteIt increased from 22.1% annual rate in July to 19.2% in August and 17.7% in September. However, the decline is stronger only if foreign cards are taken into account, as it increased from 63% in July to 44.5% in August and 35.2% the following month. This is all a preview of what’s still to come.