The experts during their visit to SUR.
The perception that the economy is starting to show a slight recovery is gaining strength although any positive notes are drowned out by the still depressing panorama: an absence of credit, intolerable unemployment figures (193,641 in the province of Malaga) and slow consumer spending.
To get a better picture of the current situation SUR brought together representatives of different sectors that make up the local economy - small businesses, property and construction, the hotel industry and recruitment - as well as an economist, to speak about the current financial situation and make their forecasts for 2014.
Around the table were Juan Antonio García, president of the Malaga Federation of Self-Employed workers, Traders and Business Owners;Violeta Aragón, secretary general of the Association of Builders and Developers;Francisco Moro, hotel manager and director of the hoteliers association Aehcos; Gonzalo Cadenas, manager of the recruitment agency Adecco; and Fernando del Alcázar, head of research at the Malaga association of Economists.
On the table, among other issues, were the unemployment figures that have been gradually falling over the last six months thanks mainly to the services sector. The tourism industry has just seen a record summer that confirmed the positive trend registered in spring and permits talk of a new boost to the driving force behind the economy in Malaga, where the agro-food sector leads export activity. Property sales have defied the decline in the rest of Spain with an average increase of 3.6 per cent. Foreign demand has become key to this recovery in Malaga accounting for 40 per cent of the 8.533 properties that changed hands between January and July.
The feeling that we have hit rock bottom
Some important figures taken from economic activity in the province of Malaga in the first half of this year allow us at least to have the feeling that we are at the beginning of the end of a chapter in an economy that is particularly sensitive to cycles. This sensation anticipates forecasts, from organisations as well as the government itself, pointing to an end of the negative GDP.
The expert to defend this theory with greatest conviction is Fernando del Alcázar, who is responsible for studies at the Colegio de Economistas. He coordinates the association’s ongoing survey of the provincial economy. The latest edition, corresponding to the second quarter of 2013, concludes that for the first time it is easier to find positive figures than negative.
“We are growing and this year will end with a positive GDP. I believe that this is the year of the recovery of confidence and that it will end with zero job destruction in the province in absolute terms after some brutal readjustments.”
Del Alcázar invites his debate companions to cast their minds back 12 months:
“How was Spain then? On the verge of catastrophe [he answers his own question] and if the Government had not avoided intervention now we would be much worse, like Ireland or Greece, in an unimaginable situation. Now at least we can contemplate recovery.”
In his opinion this Sunday’s elections in Germany “will determine the policies of the ECB [European Central Bank] and that could determine the release of credit and create in the mid-term a spiral of confidence that will encourage spending.”
“The last quarter is not going to be as terrible as many think,” believes hotelier Francisco Moro, who predicts that 2014 will bring a general upturn in Europe and in Spain, “but the macro-figures are one thing and the effect on people’s pockets another.”
Moro highlights the role of the tourism industry as an indicator of the country’s real economy: “If before people stayed for five or six days now they stay for four at the most.”
He is not especially worried about the end of the summer. “I believe the figures are good, and September’s are going to be better than August’s, but that does not mean that the winter is not going to be tough on the Costa del Sol,” points out the Aehcos spokesman for whom “there’s no point getting obsessed with how to get the tourism season to last all year round after we’ve tried everything on the Costa del Sol over the last 40 years.”
However, he does believe that the Costa will notice an increase in foreign tourists “borrowed” from Egypt and Tunisia, but not as much as in the Canaries, the leading alternative winter destination for Europeans who normally head for North Africa.
Juan Antonio García, speaking on behalf of small business owners, is reluctant to speak of “optimism” although he takes the spirit on “more out of my responsibility as federation leader to transmit confidence in a recovery and a feeling of having touched the bottom than due to the figures themselves.” The economy in Malaga, in his opinion is on ‘standby’.
“The worst over? With almost 37 per cent unemployment, we can’t speak of change until this has gone down to under 15,” he states.
“I’m afraid that when autumn starts we will only have seen the effects of the north African crisis on tourism,” predicts the man at the helm of an association that represents more than 2,000 self-employed workers. He seizes the opportunity to complain of the taxation and legislative policies in general that is “suffocating” his sector.
However in July there were still 96,711 self-employed workers registered with the Seguridad Social in Malaga, 2,224 more than the previous year, figures that indicate a return to pre-crisis levels.
García points out though that the crisis has reduced the average life of a small business “from five to three years because many people are becoming entrepreneurs without training or knowledge, and have to put up with pressure from the taxman that does not take into account their real volume of activity.”
“To correct that we need more than the flat rate in social security payments that is due to be approved in October,” he says.
Gonzalo Cadenas, of Adecco, believes the next few months will be good for recruitment. Along with tourism he points to seasonal agricultural work, especially in the exporting sectors such as sub-tropical produce, as the key to a slight decrease in unemployment and an increase in spending, which is very low.”
He provides more indications of an upturn. In Malaga port recruitment in the cargo sector had fallen by 50 per cent until June-July, but “in August it has gone really well and September is not going badly. This could mean a change in the trend.”
Another sign of recovery is the recent agreement with a foreign airport handling firm for the recruitment of 200 people, something that proves, in his opinion, that Malaga has qualified labour that is of interest to employers outside the province.
Foreign buyers are behind the demand for property
House sales surpass expectations
In the crisis years the construction and development industry practically disappeared in the province, where at one point it had employed as many as 100,000 people. Property sales, however, have started to show signs of recovery in 2013 thanks to foreign demand and a continual drop in prices. Violeta Aragón, of the Association of Builders and Developers, admits that the market improvement is greater than expected especially as they “had thought that things would get worse with the increase in IVA [value added tax] and the end of the tax rebate.
Traditionally foreign buyers have been regular tourists who end up buying a holiday home, but now there are new clients who don’t answer to that profile. This is the case of the Russians “who are not all buying villas worth a million euros,” Aragón is quick to point out.
“It’s true that there is a segment with very, very high spending power, but the truth is that many are small investors who are spending 200,000 to 250,000 euros because what they want is for their children to have an education in a European country.”
For 2014, she estimates that apart from the cases of people building their own homes, which now contribute in a modest way to the slight recovery in numbers of construction projects approved, “we will also see the start of new projects, but that depends on firms and households getting access to credit and on public investment.”
Construction will get moving again and it will start even before the stock of unsold homes has run out, believes Aragón, “because there are some properties for which there is no demand, while people are looking for homes in certain areas, such as town and city centres. There will be no demand for properties built on a hillside tens of kilometres away from a town,” she says.
As far as public investment is concerned, she points out that between January and September all the combined authorities in the province invested no more than 90 million euros in construction, when in 2007 the figures had reached 1.5 billion.
She describes this as “ridiculous”: “They have totally abandoned investment when we have natural conditions of greater quality than other tourist destinations, and we must not lose that because construction also means generating services, schools, streets, renovation; all that has been forgotten. The administration must not cut down its productive investment.”
With relative optimism, Aragón can see light at the end of the tunnel created by unpaid debts by the administrations. The new plan for paying suppliers should allow dozens of firms in Malaga to recover 160 million euros in unpaid debt drawn up by the Junta de Andalucía and town halls, the majority between 2012 and 2013.
Activity increases at temporary recruitment agencies
Labour restructuring, a process under debate
“In the future the economy will start to generate more permanent contracts, but now part-time contracts are more common, the first step towards longer hours when there is a little more growth. Someone who now works just a few hours could see their working week increase to 30 or 40 hours.”
This is the optimistic prediction of Gonzalo Cadenas, who has nine years’ experience in the recruitment agency Adecco in Malaga. He believes however that a a significant reduction in unemployment in the province will take time as activities that require a lot of labour develop.
He mentions the airport where there is demand for labour from airlines and auxiliary firms, catering and handling companies.
However the increase in work for the temporary recruitment agencies is also linked to the labour adjustments that firms have been forced to carry out by the crisis. Has this come to an end? For the Adecco representative, “a lot of cuts have been made in every sector and so whenever there is an upturn in sales or activity in a firm they need to take someone on, and we are noticing that.”
He strengthens his argument with a figure: the number of firms using temporary recruitment agencies for the first time has increased by 20 per cent.
Economist Del Alcázar calls for more legislation to make it less costly for firms to reduce their staff.
“The private sector has made its adjustments but many firms have been forced to close; a greater proportion of businesses has been destroyed than jobs, but the Administration still has not done its job,” maintains the economist.
The Aehcos representative does not agree, at least as far as the hotel sector is concerned. Francisco Moro says “hotel workforces, especially those that have been around for more than 40 years, are still excessive, something which is especially clear in the winter because a hotel needs to be at least 60 per cent full to cover costs.”
Moro compares high labour costs with prices that have been frozen since the start of the crisis. Now with the good results from the tourism industry he fears that, on top of the pressure from tour operators to drop prices, they will be subject to new tax hikes.
“It makes us panic to think that we are among the few sectors that are working well. But now our investment has been delayed for five years and we have to make improvements to maintain our quality,” he explains.