Unicaja Banco has published the fourth issue of the report ‘Previsiones Económicas de Extremadura’ (Economic Forecasts for Extremadura), which, as in previous editions, has been prepared by Analistas Económicos de Andalucía.
This report is divided into four sections: 1) Economic environment; 2) Recent evolution of Extremadura economy; 3) Economic outlook for Extremadura 2023 and 2024 and 4) Provincial analysis.
The first section describes the international and national context. The second section analyses the situation of the Extremadura economy, with special focus on the evolution of the main indicators, according to the region’s productive structure. The third section includes forecasts on the evolution of the GDP and employment in the region for 2023 and 2024. Finally, the last section focuses on the analysis of the evolution and economic outlook of Extremadura provinces.
Global and national economic environment
According to the latest report published by the OECD, the world economy is expected to grow by 3.0% in 2023 and by 2.7% in 2024, in a context of continuing high interest rates, given the persistence of higher-than-expected inflation levels. These forecasts are accompanied by significant downside risks, mainly stemming from a greater-than-expected slowdown in China, the materialization of disruptions in the energy and food markets, and the maintenance of high levels of public debt.
Regarding the Spanish economy, the Quarterly National Accounts (QNA) data, from the INE, for the second quarter of 2023 (after the revision of the Annual Accounts), show that the GDP grew by 0.5%, 0.1 percentage points (pp) below the previous quarter, registering a variation of 2.2% in year-on-year terms. The increase in production in this quarter was due to the contribution of domestic demand, especially that of household consumption and investment in construction.
The latest projections published by the Bank of Spain point to a GDP growth of 2.3% for 2023. Thus, the Spanish economy will be the fastest growing among the main economies of the European Union. In 2024, growth will stand at 1.8%, supported by private consumption and gross fixed capital formation.
Recent evolution of Extremadura economy
According to the data of Extremadura Quarterly Accounts, published by Instituto de Estadística de Extremadura (IEEX), in the second quarter of 2023, GDP remained stable in quarter-on-quarter terms, after growing by 1.5% in the previous quarter. In year-on-year terms, growth was 1.6%, 0.8 pp lower than in the first quarter.
On the demand side, the pace of growth in private consumption is reported to have slowed. Retail sales have registered a better performance up to July than in 2022. On the other hand, industrial production of capital goods would point to a lower dynamism of investment in machinery and equipment, which is also seen in investment in housing, as reflected in sales and purchases.
The value of exports of goods exceeded 1,500 million euros in the first half of 2023, an increase of 6.3% over the same period of the previous year, largely due to the upturn in prices. By product, the increase in sales of canned vegetables or fruit stands out, accounting for more than 15% of the value exported by the region.
On the supply side, in the second quarter of 2023, the increases in Gross Value Added (GVA) in the agricultural (1.5%) and services (0.6%) sectors have offset the decreases in construction (-0.4%) and industry (-3.2%). In year-on-year terms, the growth in construction (4.3%) stands out, with only industrial GVA decreasing (-3.0%).
With regard to the labor market, employment continued to grow in the first half of the year, although the latest figures published by the Labor Force Survey show a slower rate of increase. Social Security enrollment is reported to have accelerated slightly, and in recent months the number of employees under the said scheme has exceeded 410,000.
According to the Labor Force Survey, in the second quarter of 2023 the number of employed persons in Extremadura stood at 416,600, which represents an increase of 13,400 persons with respect to the previous quarter, concentrated, especially, in services and agriculture. In year-on-year terms, employment increased by 0.5%, due exclusively to the increase in industry. The number of unemployed rose by 2.8%, bringing the unemployment rate to 17.1%, 0.3 pp higher than a year earlier.
Economic Outlook for Extremadura 2023 and 2024
The forecasts made by the research company of Grupo Unicaja Banco, indicate that in 2023 the regional GDP could grow by 1.8%. In 2024, the growth rate could moderate to 1.6%, in a context of high inflation, high interest rates, weakening international activity and growing geopolitical tensions.
Likewise, the number of employed persons (according to figures from the Labor Force Survey) is expected to increase by 0.8% on average for the year, based mainly on the performance of industry and the services sector. The number of unemployed could increase by 2.1%, which would bring the unemployment rate to 17.5% on average for the year, a ratio 0.2 pp higher than in 2022, given the growth in the labor force. For 2024, employment is expected to grow by 1.2%, with an estimated unemployment rate of 16.7%.
Provincial analysis
In a detailed analysis by provinces, according to estimates of the Synthetic Indicator of Economic Activity of Analistas Económicos de Andalucía, in the second quarter of 2023, growth in Badajoz and Caceres has been more moderate than in the first quarter, with year-on-year rates of 1.5% and 1.7% respectively.
In 2023 as a whole, Analistas Económicos de Andalucía estimates growth rates of 1.9% for Badajoz and 1.7% for Caceres.
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