Basque Country

• The Basque Country, with 2.22 million inhabitants, 4.6% of the total, is the region with the seventh largest population in Spain.
• The region's total GDP is 79.350 billion euros, representing 5.9% of Spanish GDP, which is the fifth highest of all regions in the country.
• GDP per capita (35,832 euros) is the second highest in Spain (27.2% higher than the country as a whole). Álava is the province with the highest GDP per capita in the country, 50.5% above the average.
• The Basque Country's productive sectors are notable for the relative importance of the manufacturing industry (21.2% of GDP vs. 12.8% on average nationwide), ranked second in the country, behind Navarre: it accounts for 10% of Spain's manufacturing output, most notably in the manufacture of machinery, capital goods, metal products and transport equipment. However, the contribution made by services and, above all, agriculture is below average.
• Its strong focus on industry explains the high proportion of regional GDP accounted for by exports of goods (41.0%) – almost 12 points higher than the national average. It has total export sales of 32.556 billion euros (2022), 8.4% of Spanish exports. The main goods exported are: motor vehicles (16.5% of the total), iron and steel (12.2%) and industrial machinery (10.8%). The region exports 20% of the country's industrial machinery, 31% of its iron and steel and 44% of its tyres and inner tubes.

In 2023, the Basque economy was less buoyant than in Spain as a whole: we estimate that GDP grew by 2.1% (vs. 2.4%). Industry, which is highly important in the region and was hit by sluggish foreign demand, was the weakest relative performer. On the plus side, the labour market was strong and services and construction performed well.

Our forecast points to a slowdown in GDP growth to 1.6% in 2024, slightly above average (1.4%). The strong structural positioning of its industry and services have made the region one of the biggest beneficiaries of EU funds, so we expect investment to be the main driver of growth. In turn, rising wages, the curbing of inflation and job creation will boost household spending.

The Basque labour market is slightly more sluggish than across the country as a whole. After growing by 1.9% year-on-year in December 2023, almost 1 point below the average, the number of registered workers affiliated to Social Security is 3.3% higher than in 2019 (+7.4% in Spain): job creation in professional activities, hotels and restaurants, as well as education has been outstanding over the last year. Meanwhile, in Q3 2023 the unemployment rate was among the lowest in the country (8.3% vs. 11.8% on average) and was almost 1 point higher than it was at the end of 2019.

According to the retail and consumer goods index (in volume), household spending is performing more weakly in this region than in Spain as a whole. In addition to the sharp fall recorded in 2022, among the steepest of all regions, chiefly due to the rise in prices, the recovery was more subdued in 2023 (+6.5% year-on-year up to November vs +7.7% in Spain), so it is 2.2% lower than in 2019 (vs. +3.0%).

After strong growth in 2022, supported by the energy sectors (the region has a refinery), industrial activity in the Basque Country underwent a sharp downturn in 2023, with the IPI falling by 2.3% year-on-year in January-November (vs. –0.6%), due to weakening global demand; therefore, it is 3.8% lower than it was in 2019 (–1.2% nationwide).

As with industry, Basque exports were hit by a sharp slowdown in 2023 and, as was the case in the country as a whole, they virtually stagnated in the first 10 months of the year; they are 26.1% higher than they were in 2019 (vs. +31.2%). Over the last year, there has been a notable upturn in exports of capital goods (especially transport equipment and industrial machinery) and motor vehicles, although there was a decline in sales of energy products, which were hit by the price correction of oil products and semi-finished goods, especially metals.