Originally published in Spanish. “El ‘procés’ ha costado a Cataluña hasta dos décimas de PIB”. Manuel Alejandro Hidalgo Pérez. Contexto Económico.

20th May 2018

Last December I did some simple estimations of the potential impact that the independence process could have on the Catalan economy. The result was clear: the cost was, roughly, one tenth of a point of GDP as long as the consequences of the institutional crisis created by the events starting on October 1st were constrained to those weeks. Today, five months later, we are in a position to estimate again the evolution of the Catalan economy and thus assess this impact with a higher confidence level.

As we did in December, I estimate a synthetic index (SI). Again, and for those that do not know this methodology, it is akin to an average of economic indicators, weighted by the relevance that they have on the explanation of the economic cycle of a region or country. All the indexes have been corrected to remove seasonal effects. And as in December the capability of this index to explain both the Spanish and the Catalan economic cycle is high, 93% and 87% respectively. The result of this exercise is shown in Figure 1, where the year-on-year increment of the index between 2012 and March of 2018 is plotted. It is clear that a gap between the Catalan and the Spanish indexes appears in October and December of 2017, while both have always had a similar value if not a gap in favour of the Catalan index.

Figure 2 shows, as in December, which is the individual contribution of each of the economic indicators used to build the synthetic index to its evolution in this period. Based on these data, our previous analysis still stands. In the first place, commerce had the biggest impact, with a greater and more negative influence than the others. Its effect was especially noticeable in October, but also again in December. The second most relevant factor was tourism, with a constant negative contribution during the last three months of the year. The rest of the indicators did not have a negative contribution. It seems that during the first months of 2018 all indicators returned to positive contributions, and that would explain that the index for Catalonia returned to the same trend as the index for the whole of Spain.

In order to provide a figure that we all can understand, the evolution of the monthly GDP of Catalonia is estimated so that we compare it with the hypothetical situation if nothing had happened. Figure 3 shows the equivalent month-on-month increment of the GDP calculated using the Chow-Lin method. Once again it is evident that the growth rate is reduced in October, and somewhat again in December. It is also apparent the sudden recovery of the growth from January onwards. With these figures the growth of the Catalan economy in the fourth quarter of 2017 would have been a 0,5% quarter-on-quarter, whereas in the first quarter of 2018 it would have been 0.7%. In the first three quarters of 2017 the growth was 0,8%, 1,0% and 0,8% respectively. If the Catalan indicators hadn’t been lower than their previous trend, similar to that of the Spanish indicators, the Catalan GDP would have grown between one and two tenths of a percent more. This is a similar, although slightly higher, than that obtained in December.

 

In short, the institutional crisis that took place last autumn in Catalonia had an impact that could seem to be reduced. One or two tenths of a point don’t look like much. But as we said in December, from a global perspective it could actually be considered rather high. A good part of the effect was probably concentrated in just two or three weeks, and in this short period of time the Catalan economy growth was reduced at least one tenth of a percent. If we extrapolated this impact to a longer period, a quarter or a year, it would be very significant.

The reader must understand that these figures only make reference to the short-term effects of the events of last autumn, and that they are only estimations. Therefore, even though we can be quite sure that the independence process, in its most tense moments, did have an economic cost, it will be never possible to obtain a completely trustworthy figure, due to the notable uncertainties inherent to the separation of different causes in economic analysis. For the time being, my preferred estimation is still in the range between one and two tenths of a percent.