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Trying to Break Up Was Costly for Catalonia

Catalonia growth had slowed from 0.9% to 0.4% in Q4.Catalonia growth had slowed from 0.9% to 0.4% in Q4.

Catalonia will continue to count the cost of its drive for independence, according to BBVA Research. The Madrid-based bank sees the Catalan economy trailing the performance of Spain overall, as indicators point to weakness across the board from job creation to consumer spending.

The lender’s research department sees Catalonia, the biggest regional economy, growing 2.1% this year compared to a forecast of 2.5% for the whole of Spain, Bloomberg reported.

BBVA says political uncertainty pegged to the region’s push for unilateral independence is weighing on growth. The expansion in the first half of 2018 will be below the average over the past three years–with all main economic indicators trailing their estimates before the illegal referendum in October, according to BBVA.

The BBVA predictions come as the Catalan parliament prepares to elect its next regional president with all eyes on ousted leader Carles Puigdemont who insists on taking office from his self-imposed exile in Belgium. Who forms the new administration will be key, according to BBVA. The central government in Madrid has warned Puigdemont can’t govern if he’s not physically in Spain.

But Puigdemont has said that he can govern the region from Belgium where he is in self-exile as he eyes a comeback after scoring big in elections.

“There are only two options: in prison I would not be able to address people, write, meet people,” Puigdemont, who risks arrest on charges of rebellion, sedition and misuse of public funds if he returns to Spain, told Catalunya Radio. “The only way is to continue doing it freely and safely.”

Meanwhile, Spain’s Economy Minister Luis de Guindos recently put the cost of the Catalan independence crisis at around €1 billion ($1.2 billion). He told Spanish radio that it was due to the slowdown in the Catalan economy after the unauthorized independence referendum on October 1.

Madrid’s warnings about economic damage were a big part of its campaign against Catalan separatists in last month’s regional election. But this is the highest estimate yet.

De Guindos said growth in Catalonia had slowed from 0.9% to 0.4% in the fourth quarter. “Catalonia used to have growth above that of Spain, it was one of the drivers of the Spanish economy,” he told Spanish radio. “However, in the fourth quarter, it’s become a burden.”

BBVA also slashed its growth forecast for Spain in November, citing the political tensions stemming from referendum. It predicts expansion of 2.5% this year, down from 2.8% in a previous report. It also trimmed its projection for 2017, forecasting growth of 3.1%.

While keeping them unchanged at these lower levels in their latest report, it said the impact on the whole of Spain from the Catalan crisis had been limited.

Some 3,100 firms have moved their headquarters elsewhere as a result of the uncertainty.

Far from resolving the crisis, December’s election highlighted the even nature of the region’s split into pro-independence and unionist sides, and set the stage for further confrontation.

The separatists are best placed to form a new administration, with separatist groups winning 70 of 135 seats in parliament. However, the Ciudadanos (Citizens) party won the popular vote.

De Guindos urged the separatists to abandon the “unilateral way” and focus on the “basic necessities” of Catalan society.

 

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