Ukraine conflict tests Alicante’s economy with mixed yet resilient results
The Ukraine conflict challenged the global economy, but Alicante stood firm, resisting the harsher forecasts. Employment and exports remained near historic highs despite a tough backdrop. Local business activity rose, helped in part by disruptions in Eastern markets. Tourism stayed at occupancy levels seen in the strongest pre-pandemic years. Yet the picture was not flawless: higher energy costs and pricier inputs squeezed profit margins even as overall activity stayed sturdy.
Spain faced two major tests in quick succession. First came the coronavirus lockdowns, which paused activity in the early months and then gave way to a cautious rebound. Soon after, Russia’s invasion of Ukraine intensified pressures, sending energy and raw material costs higher. The result was a nuanced but durable performance for Alicante as 2023 moved forward.
Official data indicate a surprisingly strong trajectory for Alicante. Exports climbed to a historic high of 7.068 billion euros by the end of 2022, up 13.69 percent from the previous year. Unemployment fell to 140,495, the lowest level since 2007, with a drop of 15,912 compared with 2021.
Experts note that energy costs are a central channel through which the war affects the economy. The rise in energy prices influences every productive sector and feeds inflation across goods and services, including what families pay at the store. The offset comes from export growth and from a shift in sourcing, as importers seek alternative suppliers that benefit local companies.
As noted by university economists, profitability did decline. Inflation and higher production costs weighed on margins, even as employment rose due to higher activity. The overall story is nuanced: sectors that adapted well could still post strong results, while others faced tighter margins and tougher competitiveness.
Regional differences appear in sectoral performance. In industry, the footwear sector surpassed its pre-pandemic export levels last year, marking a notable rebound after a difficult period as markets in Russia and Ukraine contracted. In manufacturing, metal products are pushing to modernize production lines and diversify into new markets, aiming to reduce dependence on Eastern suppliers. Companies still trimmed profits to maintain competitiveness amid rising costs.
Impact on doll manufacturers
The war exerted distinct pressure on the toy sector, where Alicante has a strong footprint in doll production and a heavy reliance on markets in Russia and Ukraine. Overseas sales softened, as market watchers had anticipated. The textile industry did not maintain broad ties with Eastern partners, a consequence of higher energy prices that hit finishing processes especially hard.
Recovery of the footwear industry brings exports to historical figures with 7.068 million
Tourism, in contrast, did not suffer a sharp decline in jobs or visitor numbers. Summer results remained in line with the best periods before the pandemic, signaling resilience in the sector even as it becomes more energy-intensive with added services like heated pools and wellness offerings. Construction also posted strong activity, especially in residential development. About 50,000 registrations represented a 37.9 percent year over year rise, the best figure in fifteen years. Foreign demand, notably from Eastern markets, helped drive this surge, while the Spanish market supported demand as inflation kept property a relatively safe investment option.
Bad year for agriculture
A counterpart to the positive trends appeared in agriculture and animal farming. The invasion triggered a sharp rise in grain and feed costs, and citrus markets faced disruptions as fruit exports from Turkey, Morocco and Egypt struggled to reach Russia and Ukraine. Higher electricity prices and pricier phytosanitary products and fertilizers also hurt many crops. Still, the regional balance remained somewhat favorable as firms adapted and pursued new market opportunities, translating to a better-than-expected outcome.
Salvador Navarro, president of the Valencian Community Business Confederation, highlights how companies responded to a difficult climate by adapting and exploring new markets, producing a more favorable situation than initially forecasted.
Unions focus on wages
Labor groups reflect a year marked by both progress and pressure. They emphasize gains from labor reform in job creation and stability while noting erosion of purchasing power as wage growth lagged inflation in many cases. For example, a regional union leader critiques that large corporations have boosted benefits while workers see less noticeable gains. They argue wage increases must align with a fair share of cost pressures to protect living standards in Alicante. Another union official echoes concerns about sectoral bargaining challenges and the risk of weakened purchasing power for families as prices rise. Both unions also commend the government for welcoming and employing Ukrainian refugees, reflecting broader social resilience in the region.
In summary, the Alicante economy shows a mix of resilience and vulnerability. Export and employment growth coexist with tighter margins and inflation pressures. The experience mirrors a broader European pattern, where diversified regional strengths help buffer shocks while energy and raw materials costs remain a focal point for policy and business strategy.