Regional Development Problems Remain Relevant in Spain

9 november 2017

The events in Catalonia in October 2017 revealed the importance of regional differences in countries that are generally regarded as highly developed and prosperous, Analytical Center experts write in their new bulletin on the current trends in the global economy.

Spain is a key EU member with a rich historic and cultural heritage. After the restoration of democracy the country's economy grew at a sustained rate and by 2008 was on a par with the leading EU member states. However, the five year recession in 2009-2013 hit Spain really hard, especially in the area of rising unemployment, as well as the three-fold increase in public debt as a percentage of GDP. The recovery of the last three years has been insufficient to restore real GDP for 2008, which is expected in 2017.

The country has the highest level of unemployment among the youth in the world; at 46%, it reflects a long period of sluggish economic growth and the institutional features of the national social insurance system, the experts note. As for the overall level of unemployment, by 2016 it had gone down to 19.6% from the record highs of 2013. The main causes of such high level of unemployment, according to the experts, include an inflexible labor market and a slump in production seen during the great recession, which led to a collapse in demand for labor. "During the crisis production plummeted in construction, the industry that employed the majority of the country's workforce. In addition, in a bid to cut costs, small and medium sized businesses switched to hiring cheap unskilled labor instead of the more expensive Spanish specialists," the experts write.

The analysts believe that the long term recession exacerbated the regional differences in Spain increasing socio-political problems. In Madrid, the highest per capita GRP is 14 per cent of the population, however it accounts for just 7% of the total industrial output and 8% of the tourist traffic. In the meantime Catalonia has 16% of the total population and accounts for 23% of the country's industrial output. The bulk of international tourists also go to Catalonia (24%), to the Islands and to the less developed Andalusia.

The experts are sure that the nature of inequality within the country had remained largely the same over the past ten years of economic hardships and revival. So the problems of regional development remain relevant.

For more see the bulletin Spain, a Country with a Lot of Regional Inequality.

For other issues of our bulletin on current trends in the global economy see Publications.