The recovery that followed the pandemic and the longing for a fully unrestricted summer have helped soften some of the war’s damage to tourism. Yet the true scale of the impact will show itself as autumn arrives. In Valencia, the Economic and Social Committee warns of a sharp economic slowdown and rising poverty, with knock-on effects on exports, household spending, and employment. The Generalitat has urged swift, practical steps to cushion the crisis in both the short term and the long run, keeping the region on a path toward stability.
The Valencia Community Economic and Social Committee does not label the downturn as a recession, but its forecast paints a sobering picture for the coming months. The panel notes the war’s direct and indirect costs, including higher energy prices and inflation, which already slowed regional growth in the first quarter. These pressures echo global trends and echo through the local economy, even as international exposure shifts in response to the conflict.
On domestic demand, the report highlights a weakening in private consumption, the economy’s main driver, driven by heightened uncertainty and squeezed purchasing power. Inflation has pinched wages, reducing real income and dampening confidence. In parallel, business investment is anticipated to slow as production costs rise and firms reassess capital plans in a higher-cost environment. The overall message is that the near term will be tougher for households and companies alike.
With respect to foreign demand, Valencia’s trade balance will feel less relief from the smaller footprint in Russia and Ukraine, yet the war could still disrupt exports and imports through stretched global supply chains and in markets with greater dependence on the two conflict zones. In March, Group exports grew by a modest 0.6 percent, after increases of 4.7 percent in January and 6.95 percent in February, underscoring a fragile external demand backdrop.
The Committee also points to a notable impact on the labor market. While the ban on objective dismissals linked to rising energy costs has been reintroduced, there has yet to be a measurable employment shock. The policy applies to firms receiving specific wage-related assistance within the shock plan designed to respond to armed conflict, but its quantitative effect remains limited to date.
Growth forecast for community cuts in half due to low demand for goods and tourism
The body also cautions about rising prices for food and energy, which amplify the risk of poverty, particularly for more vulnerable households. The watchdog group urges a coordinated approach that combines immediate relief with longer-term strategies to prevent a cliff-edge drop in living standards.
Against this backdrop, the Economic and Social Committee calls for a blend of short, medium, and long-term measures. The aim is to translate immediate support into situational and structural reforms that fuse resilience with inclusive growth. A robust dialogue among all stakeholders is essential to steer recovery, including negotiations that reflect the realities faced by workers, businesses, and communities. In Valencia, there is a clear mandate to push forward on policies that curb the growth slowdown and accelerate the development of strategic autonomy in energy, essential raw materials, and food production, ensuring supply chain security and price stability for families and firms alike.