The Valencian Community’s economy outpaced the national average in the first half of the year, according to the latest Situation Report and Economic Perspectives from the autonomous employers’ association CEV. While euro area economies were growing, the Valencian economy has already begun to slow, a trend that business leaders attribute to ongoing political uncertainty that dampens activity.
In this context, CEV notes a noticeable and sustained expansion in the regional economy during the second quarter. Growth stood at 0.5 percent, modestly higher than the national average and above euro area performance by about four tenths. This positive momentum in trade helped the region’s overall economic standing. Despite a global slowdown in international trade, the Valencian Community remained one of the top export regions and is the only area among the top four exporting regions with a positive trade balance, meaning exports exceed imports.
Yet, despite the solid progress in the second quarter, CEV cautions that current data and sectoral outlooks point to a trend toward a slower pace for the regional economy. The conclusion drawn is that the region is already on a path to slower growth as conditions evolve.
From a demand perspective, the report highlights that slower global growth could particularly affect most manufacturing sectors, aligning with the observed declines in sectors such as footwear and toys. The outlook is described as not very encouraging due to high inflation, rising financing costs, and political uncertainty, all of which constrain both consumption and investment.
On the supply side, the report underscores several pressures facing companies. Increases in labor costs, energy prices, financing, raw materials, and essential components are squeezing margins, while difficulties in recruiting skilled personnel add another layer of complexity for production and growth.
Business leaders press for faster action and reduced bureaucracy
Faced with these dynamics, CEV argues that the situation must change. Uncertainties stemming from an incumbent government and from the new administration and other levels of government create burdensome formalities and precautionary steps. CEV advocates for a program that would raise competitiveness across the economy, expand business activity, and enable greater participation in domestic and international markets. A streamlined framework would help companies leverage New Generation Funds more effectively, spur activity, and ultimately generate wealth and employment within the region.