Page 8 - economic report 2020

were the number of establishments, continuing a seven-year upward trend, and bank credit,
which saw higher growth than in 2019, signalling our financial system’s key role in facilitating
liquidity during the pandemic. The economic downturn also caused a downturn in the labour
market, although the special measures taken by the Government, such as the ERTO scheme to
support employment, partly mitigated this.

By sector, services were most harmed by the restrictions on movement, especially tourism and
commerce, leading to a record fall in activity. The trend in the other sectors (primary, industry and
construction) also worsened in 2020 in comparison with the previous financial year.

In 2020, the primary sector – which provides only 0.6% of total GVA – shrank 2.4%, as much
as in 2019. This decline was accompanied by a drop in the number of employees and utilised
agricultural area. In contrast, the number of livestock increased, after the important reduction
seen in 2019. As for the tobacco harvest, the farmers only produced 50% of their assigned quota
in 2020 and, faced with the impossibility of exporting the tobacco, proceeded to destroy the
whole harvest, as in 2019.

The fall in real GVA in the construction sector was 5.8%, a trend that contrasts with the strong
growth seen in 2019. The negative trend in activity in the sector is reflected in other indicators
such as the decrease in authorised square metres for building, authorised surface area, new build
permits, property transactions, imports of building materials and public investment expenditure.
The results of the surveys by the Cambra corroborate this decline in activity in the construction
sector, with a drop in sales figures and volume of investment. However, note that after lockdown,
in the second half of 2020, there was a significant sectoral recovery, as the works in progress
were resumed fairly rapidly, especially in the housing segment.
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As for manufacturing and industry, the trend in 2020 was also negative, if we observe the data
on real GVA which show a decline of 2.1%. The surveys by the Cambra also depict the worsening
industrial climate, with a confidence indicator that fell to the lowest level in eight years and a
capacity utilisation rate that fell to a record low. Moreover, industrial businesses indicated a steep
reduction in turnover and a falling rate of investment.

In services, the effects of the COVID-19 pandemic took the shape of a historic dip in real GVA
of 9.5% and a serious reduction in the number of workers, despite the mitigation measures
adopted by the Government. The subsector that suffered most from the consequences of the
health crisis was commerce, hotels and catering, transport, information and communications,
with a 16.5% drop in GVA. Such a negative trend can be explained by the steep dip in numbers
of visitors to the country (-36.8%), the result of the restrictions on movement imposed in
neighbouring countries.

The major impact of the pandemic on tourism sector activity was reflected in all the associated
indicators, with serious reductions in the number of total recorded overnight stays, ski days sold,
energy consumption and number of employees in the sector. Along the same line, the surveys by
the Cambra show a business perspective of the hotel sector that has greatly deteriorated in 2020,
with the historically worst valuation of business activity. So, hotels indicated an average year-on-
year fall in turnover of 50.8% and 32% in the case of investment.

As for commerce, activity also saw a very pronounced decline, which was reflected in major
reductions in the numbers of employees and energy consumption in the sector. Equally, the
surveys by the Cambra show a serious decline in business activity and notable falls in sales and
investment figures.
Introduction