They painted a grim picture for the international economy as a result of the war in Ukraine, but the reality is that the pretense was less than originally anticipated. At least, that was the case for the province of Alicante, which managed to weather the storm and overcome the dark omens of the experts. Employment and export figures demonstrate this, given that they are moving at historic levels despite a clearly negative context. In fact, the activities of companies have increased significantly, largely thanks to the blockade of industry in the Eastern countries. Tourism also offers occupancy levels comparable to the best years before the pandemic. In any case, not everything that glitters is gold, because we must counter this abundance, the rise in energy costs and raw materials significantly narrowed profit margins.
As in all countries, the state’s economy had to pass two difficult tests in a very short time. First, there was the coronavirus pandemic, which completely stopped activity in the first months of quarantine, then a slow but gradual recovery began, with its difficulties. But when normalcy begins to appear for a moment, just a year ago, the Russian invasion of Ukraine broke out, and this only deepened the problems that were already going on before, such as the increase in energy costs and all kinds of raw materials.
After that time, it’s time to assess the situation and if we look at the official figures, the reality is that the Alicante economy has done quite well. At least, this shows in terms of exports, which reached the highest level in history with 7 billion 68 million at the end of 2022, an increase of 13.69 percent compared to the previous year. Unemployment data is also at its lowest level since 2007, with 140,495 unemployed, 15,912 fewer than in 2021.
Ignacio Jiménez Raneda, former rector of the University of Alicante and professor of Fundamentals of Economic Analysis, does not hesitate to point out that the war has had a very significant impact on energy due to the restrictions on crude oil and Russian gas. He notes, “This is a big problem because the rise in energy costs affects all productive sectors and causes inflation that is transferred to all kinds of products, including what’s in the shopping cart.”
Jiménez Raneda explains that momentum goes hand in hand with the growth of exports and is encouraged by the industry blockade in Eastern countries, which prompted importers to seek supply alternatives that benefit companies in the province.
On the downside, both Raneda and José María Gómez Gras, professor of Business Organization at Miguel Hernández University, agree that there was a drop in profitability. According to the second expert, “it will be necessary to analyze company by company, but there is no doubt that, with inflation and rising production costs, the profits of the companies fell considerably. More employment is normal because there is more activity but margins have declined.”
This is the general assessment, but things have changed on the basis of neighborhoods according to the sectors. In the industrial field, shoes managed to surpass pre-pandemic export levels last year after a long journey in the desert, and there is an opinion that the results would have been better if the war had not broken out in the industry because they lost their markets in Russia and Ukraine.
Beginning with metal, emphasis is placed on companies’ efforts to improve their production systems and seek alternative markets, also positioning itself to attract customers whose main suppliers so far are in Eastern countries. However, companies do not hesitate to reduce their profits because they cannot handle the cost increases in order not to lose their competitiveness.
Impact on doll manufacturers
The war also had a very special effect on the toy industry. Doll manufacturers with a major weight in the province of Alicante and some of their strongest markets in Russia and Ukraine. This was reflected in overseas sales as predicted.
Textile did not maintain significant trade relations with Eastern countries. The problem came hand in hand with rising gas and electricity costs, especially for the finishing sub-sector.
Recovery of the footwear industry brings exports to historical figures with 7.068 million
Tourism, on the other hand, did not realize the impact of the war in terms of occupation, because figures obtained last summer have been compared with those achieved in the best years before the coronavirus pandemic. Here, too, the issue came hand in hand with the profitability of different organizations, given that it is an increasingly electro-intensive industry due to a range of services included in services such as heated pools or hot tubs.
One of the sectors that performed better last year was construction and more specifically residential developers. A good example of this is 50,000 registered operations, a 37.9% increase over the previous year and the best number in the last 15 years. The explanation should be sought mainly in strong foreign demand, and especially those from Eastern countries, which as a result of the war led to a significant emigration of high-purchasing citizens. The Spanish market also contributed to this notable rise, albeit to a lesser extent, as inflation made the property market a safe place to invest.
Bad year for agriculture
There must be a counter party in agriculture and animal husbandry, where the war has seriously damaged. The invasion caused an extreme increase in grain prices from the very beginning, which was reflected in feed prices. Citrus also saw how European markets were clogged in the middle of the campaign due to the infestation of fruit from Turkey, Morocco and Egypt, which could not enter Russia and Ukraine. To this we must add the increase in the costs of electricity, phytosanitary products and fertilizers, which left a large part of the crop unprofitable.
Overall, the balance has been generally positive. Salvador Navarro, president of the Valencian Community Business Confederation, highlights the reaction of companies in such a negative context: They know how to adapt and seek new markets and the result is that the situation is now much better than expected.
Unions focus on wages
The unions balance the war year dotted with light and darkness. While emphasizing the good results of labor reform in terms of job creation and consolidation, they also regret the loss of purchasing power of workers due to wage increases in 2009. In most cases, it was less than the increase recorded by inflation.
Paco García, general secretary of the CC OO, criticizes that large companies increase their benefits more than appreciably without being reflected in their employees’ perceptions. He adds that wage instability is having a greater impact on the province of Alicante, where historically the region has lagged behind the rest of Spain.
Yaissel Sánchez, secretary general of the same union, also underlines the difficulty in negotiating sectoral agreements due to resistance by companies. This has resulted in a loss of purchasing power that has affected some families significantly, as purchase prices have skyrocketed. However, Sánchez hopes that the agreements signed are fulfilled as expected. Finally, both CC OO and UGT praised the state’s solidarity in welcoming and employing Ukrainian exiles.