Spain | Valencian Community Economic Outlook. Second Half 2022

The GDP of the Valencian Community grew by 5.8% in 2021. But the war in Ukraine and the sanctions reduce growth expectations. Thus, the Valencian GDP is expected to increase by 4.3% in 2022 and to slow down in 2023, when the increase will be 0.7%.

Key points

• Key points:
• GDP growth in 2021 (5.8%) was driven by the recovery in tourism, household and business spending, and the impact of public policies.
• The first half of 2022 was characterized by the dynamism of employment and consumption, but the data for 3Q22 point to a deterioration in activity.
• In 2023, GDP growth is forecast to stand at 0.7%. The correction in consumption and investment, linked to worse expectations, higher inflation and interest rates, will slow down regional growth across the board. The negative difference with respect to Spain will be due to a lower boost from tourism, especially foreign, as a result of the slowdown in Europe.
• At the end of 2023, the region's GDP per capita could be at the pre-crisis level. The Valencian economy has already recovered the levels of employment prior to the crisis, while the unemployment rate will drop to 13.9% in 2023.
• Public policies are going to be key to minimizing the effects of war. The drop in the price of electricity will be significant. In the absence of an income pact, the unequal impact of inflation can increase social conflict. Uncertainty about investment linked to the NGEU persists and spending could leak into higher imports in the face of supply constraints.

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