BBVA Research forecasts growth of 9.6% this year, although it sees a "downward bias" as a result of the conflict that would be "limited"
The control of the pandemic, the saving of families and the promotion of European recovery funds will allow the Canarian economy to maintain a «
high growth» during 2022 and 2023 and the
unemployment is reduced to 16.6% at the end of the next exercise. These are the BBVA Research forecasts included in the 'Canary Islands Situation' report, which contemplates a possible "downward bias" as a result of the war in Ukraine and the rise in fuel and energy prices, but which in any This case will be "limited", according to the chief economist for Spain of this group, Miguel Cardoso.
In this regard, he stressed that the Canarian economy will chain three years of growth and it is possible that in 2023 it will approach the levels of activity existing before the pandemic. And it is that after the fall of 18% of the Canarian GDP in 2020, last year it already recovered 5.2% and this year it could be 9.6% and 5.7% in 2022. If this is fulfilled stage,
the unemployment rate could be reduced to 16.6% and create around 121,000 jobs in these two years.
These assumptions were made before the war and, therefore, a "downward bias" of these forecasts should be considered. Even so, growth will continue on the islands, said Cardoso, who warned that the risks come not only from the impact of the sanctions on Russia, but also because a pandemic situation is still being experienced, in addition to higher inflation.
Cardoso -who was accompanied in the presentation by the territorial director of BBVA in the Canary Islands, Guadalupe Hernández, and José Manuel Martín, regional director of BBVA Canarias-,
highlighted that despite the uncertainty and volatility of raw materials, the archipelago will continue to grow, although there has been "some slowdown" in the first quarter of 2022 compared to the last of last year. This circumstance is due to the appearance of the Omicron variant -which curbed consumption and tourism-, and to the bottlenecks in the production chains. As an example, he pointed out that registrations fell by 40% last year compared to 2019. However, part of this drop, Cardoso explained, is related to the lack of availability of the product and higher prices, that is, it has to deal with supply and not with demand.
Another factor behind the slowdown is inflation. Fuel and electricity prices have already been rising since the middle of last year and have been intensified by the war. According to Cardoso, it is possible that they will continue for a long period of time "and one of the risks will be that to the extent that companies perceive the increase as insane, they will transfer it to costs."
For the expert,
tourism will not be significantly affected because spending, both by Canarians and the rest of the State, remains relatively strong, while northern Europe sees the archipelago as a refuge. "The greater uncertainty and the loss of purchasing power is not transferred to lower spending levels and we are not seeing much impact," he pointed out, a circumstance that will continue in the future thanks to the savings bag of the Canary Islands, which exceeded in 8% the pre-pandemic period.
The execution of the Next Generation funds will also contribute to the growth of the Canary Islands, despite the fact that its delay could affect the planned scenario. In this regard, he indicated that "we should have a real-time evaluation" of the programs that have been launched. Regarding the open debate about a tax cut to compensate for inflation, he questioned its efficiency and opted for a tax to limit the increase in the profits of electricity generating companies and use those resources to benefit lower-income consumers.
Effect of the minimum wage
The chief economist for Spain at BBVA Research, Miguel Cardoso, considers that
the continuous rise in the last five years of the minimum wage has had "a negative effect." In his opinion, going from a salary of 650 euros per month to 1,000 euros has discouraged job creation, which has seen between 50,000 and 100,000 fewer jobs in all of Spain since 2017.
On the other hand, his assessment of the labor reform is "moderately positive", although he added that to carry out a deeper analysis he will have to spend more time. In this regard, he indicated that job creation is registering more than twice the number of permanent contracts than in previous years "which indicates that the incentives are giving results." This situation will allow workers to gain experience, rights and a better salary.
On the other hand, Cardoso valued the elements analyzed in the 'Canary Islands Situation' report and which support his growth forecasts in the autonomous community. Among those factors, he cited
affiliation to Social Security, which at the beginning of 2022 has already exceeded the levels of the fourth quarter of 2019, including a "strong growth" in La Palma, which shows that the impact of the volcano in this aspect has been punctual. In any case, he indicated that not all the islands have the same behavior and, together with La Palma, Gran Canaria and Tenerife, they are the best sustained because they have a more diversified activity and because of the support of public spending.