Industry and exports will slow the pace of growth in Catalonia, according to BBVA

BarcelonaBBVA has reduced its growth expectations for the Catalan economy for this year and 2023. The bank's research service believes that this year the delay in international markets may have a negative impact on industry (which in Catalonia has greater weight than in the rest of Spain) due to the war in Ukraine and the persistence of logistical problems to supply chains. Despite this, consumption and investment will continue at a good pace and tourism will be one of the engines of activity.

BBVA Research presented its half-yearly report on the economic situation for Catalonia this Wednesday. In the last edition of the study, published in November, the growth rate of Catalan gross domestic product (GDP, the indicator that measures a region's economic activity) stood at 5.6%, 0.1 above the state average. However, the bank has now revised this figure downwards to 4.2%, 0.1 less than in Spain as a whole, "due to the greater weight of industry" in Catalonia, BBVA Research's chief economist, Miguel Cardoso, explained. Growth forecasts for 2023 are 3.5% of GDP.

BBVA thus joins a large number of public and private institutions that have revised their forecasts on the evolution of the economy, both at Catalan and Spanish levels. The main causes are those derived from the Russian invasion of Ukraine, which this year will hit Catalan industry hard for several reasons.

Firstly, the rise in energy prices directly causes an increase in the production costs of all companies, but especially of industrial companies, which tend to have a very intensive consumption of electricity and gas. Secondly, this increase in energy prices has led to widespread inflation in many products, with a particular impact on industrial intermediate goods and raw materials, as well as a slowdown in growth in all the world's major economies. Therefore, manufacturing exports, one of the traditional drivers of the Catalan economy, will be delayed during 2022.

In addition, from 2020 onwards, the industry will suffer logistical problems and global shortages as a result of the resumption of activity once the most intense phase of the pandemic has been overcome. The recent lockdowns in China, moreover, have also caused logistical chaos around the world. Despite this, Cardoso expects that as this year progresses and especially during 2023, "uncertainty and bottlenecks will be reduced".

Good pace of consumption and investment

Despite the reduced growth forecast, the Catalan economy will continue to grow thanks to private consumption, home purchases, tourism and the EU's Next Generation funds, according to Cardoso. Precisely, the arrival of European funds will create a "favourable" climate for public investment – especially in infrastructure – which could be a "driving factor" for private investment in sectors such as renewable energies or to promote the digitisation of Catalan industry.

All these engines of growth will drive job creation, and BBVA expects an unemployment rate of 8.5% by 2023, which now stands at over 10%.