Spain | Valencian Community Outlook. Second Half 2021

The recovery of the Valencian economy has increased in intensity in recent months, so that it will grow well above its potential, and will recover its pre-pandemic GDP level by the end of 2022.

Key points

• Key points:
• Until the revision of 2Q2021 growth by the INE, forecasts suggested that the Valencian Region could grow by 6.7% in 2021 and 6.6% in 2022, create some 122,000 jobs compared to the end of 2020, and reduce the unemployment rate to 14.9%. These forecasts have a clear downward bias as the delay in Spain's economic recovery is confirmed, but growth will remain above its potential.
• The rebound in European markets has had an impact on the improvement in exports of semi-manufactured and capital goods, although the weakness of the automobile sector weakens growth.
• In 2022, the economy could maintain its growth momentum. The improved control of the disease, the use of the savings held by households, the approval of the Recovery Plan, the arrival of the NGEU funds, the ECB's stimulus measures and a high productive capacity will allow a historically strong growth rate to be maintained.
• Downside risks include rising costs. Shortages of materials and raw materials and rising transport costs are already holding back the production of capital goods and automobiles. And energy prices could remain high
• In the medium term, the bias will depend on the reforms to be implemented in the coming months and on the speed and efficiency of the implementation of European funds. Moreover, growth will have to be compatible with environmental sustainability goals.

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