2003 Economic Report on Andalusia © 2004, by Consejería de Economía y Hacienda 2003, Junta de Andalucía Written by Secretaría General de Economía Translated by Jayne Cotgreave and Pedro Satué Published by Servicio de Asesoría Técnica y Publicaciones Designed and printed by: ISBN: 00-0000-000-0 Legal deposit: SE-0000/2004 Printed in Seville, Spain Table of Contents 1. World Economy 9 2. Spanish Economy 33 3. Overview of the Andalusian Ecnomy 47 4. Population 69 5. Productive Sectors 83 Primary Sector 85 Industrial Sector 97 Construction Sector 111 Service Sector 123 6. Aggregate Demand 135 7. Foreign Trade and Investment in Andalusia 147 8. Structure of the Business Sector 171 9. Labour Market 183 10. Prices, Labour Costs and Income 205 11. Banking System 223 12. Andalusia in the Context of the Spanish Regions 239 13. Convergence Between Andalusia and the European Union 259 14. New Economy and Knowledge Society in Andalusia 271 List of Tables 309 List of Charts 315 List of Boxes 323 ECONOMIC REPORT ON ANDALUSIA 2003 Presentation The Regional Ministry of Economy and Finance presents its sixteenth annual Economic Report on Andalusia for 2003. The incipient world economic recovery of 2002 fi rmed in 2003, after a poor growth performance in 2001, the weakest since the early nineties. Spurred by highly expansive macroeconomic policies, economic growth rates were faster than the previous year, surpassing initial forecasts, and infl ation remained relatively tame. The economic recovery gained momentum in 2003 and was signifi cant in its geographical extent, with most of the economic regions around the world benefi ting from the upturn. Adding to the strong performance of the United States, which spearheaded economic growth in the industrialised countries, Japan remained on the path of recovery and Asia registered high growth rates, boosted by rapid expansion in China. The economic recovery experienced in Russia, Central and Eastern Europe and Latin America was modest, but very signifi cant in that it heralded the end of the recession suffered in these areas in 2002. The main exception to this global economic recovery was undoubtedly the European Union, particularly the euro area. Five years into economic and monetary union, these countries recorded the weakest growth in ten years in 2003, infl uenced by a sharp appreciation of the euro on currency markets and very sluggish domestic demand, which was not offset by favourable monetary conditions. Against this backdrop, the Andalusian economy once again outperformed economies in its sphere in terms of growth, keeping the process of real convergence with them on track. Real gross domestic product (GDP) at market prices grew by 2.6% in Andalusia, two tenths of a point faster than in Spain as a whole and 2.2 points faster than in the euro area. As a result of this differential economic growth, the Andalusian economy increased its percentage share in national GDP to 14.2% and in euro area GDP to 1.3%. In terms of income per capita, Andalusia therefore continued to close the gap on the EU in 2003. GDP per capita measured in purchasing power parity terms was 69.4% of the average calculated for the fi fteen-member European Union, almost one percentage point up on the previous year. On the supply side, the non-agricultural sectors contributed to economic growth in Andalusia, expanding at a faster rate than in Spain or the euro area. With regard to domestic demand, both consumption and investment were buoyant, with particularly good results for spending on consumer durables and investment in construction, in a context of falling interest rates that led to fi nancing conditions that were more favourable than the previous year. Andalusia’s external demand also strengthened as world trade picked up after moderate growth the previous year, with a signifi cant overall increase in trade with other countries and positive results for both inward and outward foreign investment. 7 1. WORLD ECONOMY Andalusia’s strong economic performance in 2003 was also mirrored in the labour market and entrepreneurial activity. The number of non-agricultural enterprises operating in Andalusia was 4.7% up on the previous year, a higher increase than registered nationally (3.8%). A breakdown by employment size reveals that the highest increase was in bigger enterprises. It is also signifi cant that Andalusia had a lower closure rate than Spain as a whole, a trend observed throughout the current growth cycle. The region’s labour market picture was also good, with robust job growth (3.4%) that exceeded both the national average of 2.7% and the European Union average of 0.2%. In absolute terms, 85,900 jobs were created in 2003, accounting for almost 20% of total job growth in Spain and almost half of employment gains in the euro area, well in excess of its share in total jobs in Spain as a whole (15.5%) and the euro area (2%). The pattern of job growth in 2003 brought Andalusia closer into line with the most developed economies in terms of labour market structure. Job growth was stronger among wage earners, particularly those with open-ended contracts of work, women, part-time workers and people with university degrees. Job growth also outstripped labour force growth, resulting in a fall in jobless numbers in the region, in contrast with the increase in unemployment registered nationally. In an international context characterised by a lack of infl ationary pressures, indicators for Andalusia revealed that price growth slowed over 2003, and the year ended with the lowest infl ation rate since 1999 and the narrowest differential vis-à-vis the euro area in four years. This favourable infl ation trend resulted in an increase in the purchasing power of wages, which, in turn, spurred domestic demand. The indicators used to monitor what has come to be known as the “new economy”, the “information society” or the “knowledge society” reveal the continued development and rapid expansion of information and communication technologies in Andalusia, which registered high growth in this area, exceeding national averages. With regard to Andalusia’s position in Spain as a whole, partial economic indicators measuring production, demand, entrepreneurial activity and employment show that, in 2003, Andalusia achieved better results than those averaged by the Spanish regions. 8 1. World Economy ECONOMIC REPORT ON ANDALUSIA 2003 World Economy Introduction This improvement was observed in most of the economic regions, particularly the developing countries, In 2003 the world economy enjoyed a period of which achieved the highest growth in 2003, recovery, after registering the weakest growth in continuing the trend of recent years. Within this eleven years in 2001. According to the International group, the strongest growth performance was seen Monetary Fund (IMF), world GDP growth quickened in Asia, and Latin America came out of the recession from 3% in 2002 to 3.9%. suffered in 2002. Chart 1. GROSS DOMESTIC PRODUCT 7 World 6 Industrialised countries 5 Developing countries 4 3 NOTE: 2 Year-on-year percentage change in real terms. 1 Source: IMF. Compilation: Offi ce of the Secretary-General for 0 Economy, Junta de 1996 1997 1998 1999 2000 2001 2002 2003 Andalucía. 11 1. WORLD ECONOMY The economic performance of the industrialised beyond the traditional view of achievements in terms countries was also positive, although the recovery of conventional indicators. was not as strong as in the developing countries. The United States was one of the best-performing The 2003 report shows that although the majority of economies and Japan came out of the recession countries have achieved higher levels of development of the previous year. The fi fteen-member European in the last twenty years, progress is very slow and Union and the euro area, lagging behind in the some countries have even experienced development economic cycle, showed no signs of recovery, while reversals. the ten new members of the European Union enjoyed a signifi cant economic revival. In addition to the results of the human development index (HDI) and other indexes published each year, Other significant features of world economic the 2003 report also includes an analysis of the performance in 2003 include well-contained millennium development goals adopted at the United infl ation, the depreciation of the dollar against other Nations Millennium Summit held in September 2000. major currencies and continuing low interest rates These goals, which set clear targets for reducing on the back of an expansionary monetary policy poverty and advancing human development, highlight implemented with a view to stimulating economic the fact that many countries that implement social recovery. and economic measures have not yet achieved strong growth because geographic isolation, hostile Buoyed by the overall improvement in the economy, environments and other handicaps mean that the world trade in goods and services intensifi ed, sustained external support at well above existing growing faster than world GDP once again. levels is critical to advance their development. This analysis of the world economy is supplemented by the information that the United Nations Industrialised countries Development Programme (UNDP) publishes each year in its Human Development Report, which offers In the industrialised countries the economic recovery a more comprehensive picture of development, that had begun the previous year continued to gain Chart 2. GROSS DOMESTIC PRODUCT 5 USA 4 Euro area 3 Japan 2 1 NOTE: Year-on-year percentage 0 change in real terms. -1 Source: OECD. Compilation: Offi ce of the Secretary-General -2 for Economy, Junta de 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Andalucía. 12 ECONOMIC REPORT ON ANDALUSIA 2003 momentum in 2003. The OECD estimates that GDP and Slovakia, both with 4.2%, and Iceland, with 4%.