Two economies under pressure and resilience across Alicante
The world imagined a grim next chapter for the global economy due to the war in Ukraine, yet the actual impact proved more nuanced. In Alicante, the forecasted storm did not derail prosperity; instead, the region navigated adversity with surprising steadiness. Employment and export metrics moved at historically strong levels despite a challenging backdrop. Local businesses expanded their activities, helped in part by shifts in trade flows as Eastern industry faced blockades. Tourism held occupancy rates near the highs seen before the pandemic. Still, the shine has its limits: higher energy costs and rising prices for raw materials squeezed margins and challenged profitability.
Across nations, the state economy faced two brutal tests in quick succession. First, the coronavirus lockdown shut many activities for weeks, followed by a cautious recovery. Then, a year ago, the invasion of Ukraine added new strains, especially through elevated energy costs and a surge in raw material prices. The combined effect pressed margins and forced many sectors to rethink costs and supply chains.
Official figures show that Alicante’s economy performed reasonably well in this context. Exports reached a record high of 7 billion 68 million by the end of 2022, up 13.69 percent from the prior year. Unemployment fell to 140,495, the lowest since 2007, with 15,912 fewer unemployed compared to 2021. These milestones suggest a resilient economy capable of weathering external shocks while maintaining momentum in key sectors.
Ignacio Jiménez Raneda, a former rector of the University of Alicante and a professor of Fundamentals of Economic Analysis, notes that energy costs have been driven higher by restrictions on crude oil and Russian gas. He explains that rising energy prices ripple through all productive sectors and contribute to inflation that affects household spending, including items in the shopping cart. Yet he also highlights a countervailing force: exports rose as Eastern markets tightened, pushing importers to diversify sources and opening opportunities for Alicante’s producers.
According to Raneda, the export surge aligns with a broader shift in supply chains, as the industrial sector adapts to sanctions and envisions new markets beyond Eastern suppliers. This diversification supports growth even as producers face higher inputs. José María Gómez Gras, a professor of Business Organization at Miguel Hernández University, cautions that profitability declined while employment rose. He emphasizes that inflation and higher production costs eroded margins, though increased activity helped cushion the overall picture.
There are nuanced differences by sector and by neighborhood. In manufacturing, the footwear industry recovered past pre-pandemic export levels last year after a prolonged drought, though some experts believe the war disrupted markets that once depended on Russia and Ukraine. In metal and other heavy sectors, firms are investing in smarter production systems and seeking new markets to reduce dependence on Eastern suppliers. Companies are careful to protect profitability, even as they invest in long-term resilience to stay competitive.
In the doll sector, a notable reliance on Russia and Ukraine meant the war had a distinctive impact on overseas sales. The textile sector also faced challenges, with rising energy costs weighing on finishing and other sub-sectors that use significant amounts of gas and electricity.
Recovery of the footwear industry brings exports to historical figures with 7.068 million
Tourism did not show a sharp drop in occupancy due to the war, mirroring a rebound that hits the levels seen before the pandemic. The sector is increasingly energy-intensive due to enhanced service offerings like heated pools and spa amenities, yet the profitability of tourism-related businesses remains a pivotal factor in the regional economy. Construction fared well, especially in residential development, with around 50,000 registrations representing a 37.9 percent rise from the previous year and the strongest figure in fifteen years. The surge reflects robust foreign demand, particularly from Eastern markets, as well as a shifting landscape in Spain where inflation has made property an attractive investment.
bad year for agriculture
Agriculture and animal husbandry faced a tougher year as the war disrupted supply chains and sent grain prices sharply higher. Feed costs rose, citrus exports faced competition from fruit shipments from Turkey, Morocco, and Egypt, and the costs of electricity, phytosanitary products, and fertilizers reduced farm profitability. Overall results remained positive, but the reaction of Valencian businesses showed resilience. Salvador Navarro, president of the Valencian Community Business Confederation, notes that companies adapted quickly, sought new markets, and found that the situation ended up better than expected.
Unions report that wages remained a central issue. They credit labor reform with creating jobs and stabilizing employment, yet they warn that workers saw purchasing power eroded by inflation and wage adjustments in 2009. Paco García, general secretary of CC OO in l’Alacantí-Les Marines, criticizes large firms for boosting executive benefits without proportional gains for employees. He laments wage inequality and notes that Alicante has historically lagged behind national wage norms. Yaissel Sánchez, secretary general of the UGT at the regional level, adds that sectoral bargaining faced resistance from some companies, which affected families whose purchasing power declined as prices climbed. Both CC OO and UGT praised the state for welcoming Ukrainian refugees and supporting their integration into the local labor market.