Costa del Sol economy

According to the economic analysts of Andalucía the current economic recession will continue to affect Andalucía until the 4th quarter of this year with the GDP of Andalucía shrinking by 1.3% in 2009. This is in contrast to 2008 when GDP increase by 1.1% in Andalucía.

But what about the province of Malaga? On a more positive note, Malaga will do better than average with a decrease 1.1% this year, after growth of 1.5% in 2008. Furthermore according to the analysts the effects of the current economic crisis will be felt in all sectors of the service industry but will be especially painful in the construction industry. This will not be of any surprise to anyone familiar with the south of Spain which has seen breakneck growth the construction industry over the last decade. To give you an idea of the health of the building industry, there were 13,233 fewer building licences issued up to September of last year than the year before!

On a slightly worrying note, the report also discusses what is need to be done to revive this sector, which is this authors view is erroneous as further residential construction is not needed in the province of Malaga. Anyway according the study, average prices would need to drop by an additional 27% to help jump start the industry.

Why 27%? The according to the analysts 56% of the average Malaga families income goes towards mortgage repayment, whereas the optimum should be 30%. S for property to be more affordable to the average local prices need to drop. What the report does not look at is large decreases in the euribor rates and the fact that the average wage in Malaga is less than 1000€ monthly. This is primarily due to the fact that the 2 largest employers in the province have been tourism and construction. Industries not known for high wages.

It should also be noted that during to the nature of these industries and the types of employment contracts used, more of these individuals would not be able to attain mortgages even with a 27% decrease.

The analysts also seem to recommend that the current economic situation should be used as an opportunity to diversify the economy away from the more traditional industries so has to create a more balanced economic base. Which we are seeing with the expansion of the Malaga airport, the renewable energy projects in Cadiz, etc…

But anyway, what about the Costa del Sol, considering this is a Costa del Sol property blog? The analysts claim that the Costa del Sol seems to be sheltered from the worst effects of the recession. This is especially relevant when, according to the latest figures from the Institute for Tourism Studies, tourism in the entire Andalucía region decreased by 2.3% last year yet increased by 2.32% on the Costa del Sol. A trend that the analysts believe will continue in 2009.

Andrew Belles

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