The economic situation and outlook report for the second quarter of 2024 prepared by the Business Confederation of the Valencian Community (CEV) indicates that The regional economy will continue to grow dynamically in the coming quarters, although at lower rates, and could reach for the whole year overall growth of close to 2.7%.
The regional employers’ association stresses that even if this growth “will not be homogeneous between sectors and their productive branches”, overall “This will allow us to continue to generate jobs and reduce unemployment”.
The report states that, according to estimates by the Independent Authority for Fiscal Responsibility (AIReF), the economy of the Valencian Community grew by 0.7% quarterly and 2.8% annually in the second quarter of 2024. This advance is greater than expected, but it represents a turning point in the previous trajectory and the beginning of a phase of slight slowdown in the Valencian economy.
Both in quarterly and annual terms, growth is slightly lower than that of the Spanish economy as a whole and contrasts with the general gloom that still prevails in the main economies of the European Union. If these data are confirmed, the Community economy would experience an annualised growth of 2.9%; three tenths below the national average.
In the report, the Valencian employers’ organization predicts, from a demand perspective, that the better financing conditions will stimulate growth in private consumption and investment, which, in addition, will also be favored by a greater deployment of NextGeneration funds. The observed lengthening of the tourist season “will favor the share of external demand for services, but that of goods will still suffer from the prolonged slowness of the main destination markets.” Overall, external demand will contribute positively to economic growth.
On the supply side The structural situation and the current situation in the primary sector are worrying.both in the agricultural and livestock sectors. The situation in certain manufacturing sectors is also worrying. In particular, the automobile sector, whose indirect and induced effects on other sectors and activities are very geographically concentrated. Other traditional sectors, such as Textiles, leather and footwear are in an unfavourable situation and ratios worse than their national averages. On the contrary, branches as powerful as those related to tourism, ICT and audiovisual consolidate excellent performances and an even more dynamic trajectory than the national average. Construction also consolidates a slight improvement. These will be the sectors that will continue to drive the regional economy.
Looking ahead, it can be deduced that the regional economy maintains a notable growth rate during the third quarter of 2024, although lower than in the previous quarter, and with a high degree of heterogeneity between productive branches.
As the report highlights, businesses continue to face an increase in labor costs and high price levels of raw materials. All productive sectors have difficulty finding qualified personnel, which represents an additional element of distortion for both activity and productivity. Furthermore, many sectors subject to foreign competition suffer the consequences of excessive regulation, particularly that linked to Community regulations. The high costs associated with this regulation, as well as the lack of compliance by third countries, reduce the competitiveness of our companies.
The challenges
The CEV highlights the need to maintain a climate favourable to economic activity and investment, promoting progress in productivity and competitiveness of Valencian companies. To achieve this, in addition to the efforts that the business world will continue to make, it is necessary for the different levels of the Administration to provide decisive support to certain sectors and productive branches, such as the primary sector and the automobile industry, which are going through a deep and particularly unfavourable structural situation.
At the regional level, this support is not possible if the autonomous financing system does not provide the necessary resources to, in addition to providing quality public services to citizens, adopt economic policy measures to support these sectors. Thus, from the CEV The necessary change of the autonomous financing system is insisted, and that reform must be agreed multilaterally and include the application of a temporary leveling fundas well as the cancellation of the part of the Generalitat’s debt that caused the expiration of the financing system.
