Heat and drought threaten the economic engines of tourism and agriculture
A combination of good economic news to which several ghosts fly over. The latest data on employment and economic growth invite us to ring the bells. Spain has exceeded, for the first time, the 20.6 million people affiliated with Social Security, while exports and investment have pushed up the Gross Domestic Product (GDP).
The Government approves a tax cut of 1,800 million for 800,000 farmers and ranchers
And, at the same time, the monetary policy decisions of the European Central Bank, to try to curb inflation, together with elements that are impossible to control, such as the successive heat waves –ever earlier– and the drought, threaten to tarnish that positive economic evolution. These last two, above all, fly over sectors that are essential, such as tourism, agriculture and livestock. Together, these activities represent about 11% of Spanish GDP. Tourism has more weight, because it contributes close to eight percentage points, but the primary sector is essential for the structuring of the territory, given its relevance in rural areas.
In addition, tourism and the primary sector are key to employment. Tourism activity has been one of the engines for job creation during the month of April, with almost 120,000 more workers in the hotel industry, in a Holy Week with record hotel occupancy rates. At the end of the fourth month of the year, hotels, bars and restaurants added more than 1.8 million people affiliated with Social Security.
Meanwhile, the countryside represents more than 748,000 employed people, according to the latest Active Population Survey (EPA) published by the National Institute of Statistics (INE). Fundamentally, men, more than 567,000. An occupation that is already going down, because at the end of the first quarter it was at a distance of 68,600 employed with respect to the average of the previous five years, according to the Ministry of Agriculture, Fisheries and Food in one of its latest reports on employment.
Tarnish record tourism forecasts
The current situation of tourism and the countryside is very different. The first one is experiencing a sweet moment, which can be marred by unprecedented heat and where there are already voices that believe that the high temperatures and the lack of rain could damage a year that is expected to be historic. Instead, the field already comes from a bad exercise. 2022 was marked by drought, fires and the disappointment of many producers due to the lack of profitability of their agricultural and livestock farms.
The tourism sector has spent months seeing how demand continues to rise despite the fact that the prices of flights and hotels are skyrocketing. But there are actors who have already pressed the alarm button. At the moment, they are warnings. One of them comes from the Commercial Activity Index of the Spanish services sector prepared by Hamburg Commercial Bank and S&P Global, the so-called HCOB PMI.
This index stood at 57.9 in April, compared to 59.4 in March. This indicator is based on a single question that is asked to 350 companies in the service sector: how is their activity compared to the previous month. On the positive side, companies highlight foreign demand and employment growth. On the negative, that in tourism not everything is glitter. “Although the HCOB PMI is a good indicator of the health of the Spanish economy, many observers will be very attentive to the thermometer in particular, given the heat wave that is brewing and that is affecting all of Spain,” Cyrus de la Rubia notes. , chief economist at Hamburg Commercial Bank. “Depending on the severity, there are likely to be negative economic effects, possibly also on tourism,” he says.
Other notices come from articles published in international media, such as Sky or The New York Times. The first, entitled ‘This area of Spain could become too hot for tourists’, focuses on the atypical high temperatures in April in Andalusia. The second, in that this anticipated heat warns of what is ahead. Last summer there were some cancellations of reservations due to the heat wave, although sources in the sector assure that they were minimal,
Positive expectations, although it depends on each area
At the moment, these warning sirens do not reach the sector that maintains clear optimism. It has it, for example, the Government. The forecasts for the summer “are extraordinary”, assured the Minister of Industry, Commerce and Tourism, Héctor Gómez, at the end of April. “The forecasts of the employers and the different business organizations speak of an occupation in some communities of 100% and exceeds 85% or even 90%, in others. We are going to be prudent in these types of considerations, but for the remainder of the year, not only in summer, the forecasts are extremely good, ”he assured.
Sources from his Ministry indicate to elDiario.es that, currently, “there is no official study that considers weather as a factor that may affect tourism” and that these positive forecasts confirm the evolution in the number of travelers so far this year and reservations, also for flights, for the summer. If there is fear of the effect of the drought and the heat, it will be possible to see it in the coming days, when the Tourism Sectoral Conference will meet, where the different territorial administrations are present.
Some of the main companies in the sector are pointing in the same direction. “In general, the forecasts for the summer in Spain are very positive, with improvements both in sales volume and in average rates compared to 2022, which was already a very good year,” Meliá sources explain. “All of our source markets – except Russia, obviously – are performing very well, especially Spain, the United Kingdom and the United States,” they add, noting that much of the growth comes from their high-end, luxury hotels.
That perspective is also seen by the NH chain. “The forecasts we have in Spain for this summer are positive compared to last year in practically all destinations. As of today, the occupancy rate for the summer of this year is higher than the equivalent for the summer of last year. In fact, the figures are better both in clearly summer destinations, such as the north of Spain or Marbella, and in urban hotels such as Madrid, Granada, Córdoba or Oviedo”, he explains, despite the fact that the latter are not typically summer destinations.
“In general terms, we have very positive forecasts for this summer season, we are aiming for a global figure of between 75% and 85% for the hotels that we operate in Spain throughout the summer months,” says Palladium. “Specifying a little more, for the high season –July and August– in the Balearic Islands we expect to reach 90% or 95% occupancy; while in the case of Tenerife or Costa del Sol, we are talking about occupations around 80% – 85%, respectively”, affirms this hotelier.
The primary sector demands more aid for the drought
That the drought affects the countryside is obvious. “The drought is having a negative impact on the agricultural and food sectors,” points out BBVA Research in an analysis published at the end of April on the economic evolution of Andalusia, which serves as an example of how this situation affects the territories hardest hit by lack of rain. “The poor behavior of agriculture slows down progress in non-urban or non-tourist areas and prevents Andalusia from creating more employment than the whole of Spain”, he deepens.
The drought, points out BBVA Research, threatens production and agricultural income and highlights three variables. On the one hand, oil production (Andalusia contributes 75% of the national total) which is expected to be half compared to the previous campaign. On the other, that the dammed water in the Andalusian basins is 34 percentage points below the average of the last 10 years. And, also, the problem in the production of red fruits from Huelva, which is 20% lower with international prices that are going down.
In this context, the field asks for more aid. Among them, the Union of Small Farmers and Ranchers (UPA) calls for an advance of funds from the European Common Agrarian Policy (CAP), to allow reserve funds and budgetary remnants of the EU to be used to alleviate the situation of the affected sectors and payments for those who cannot sow the usual areas, as is the case with cotton, industrial tomatoes, rice or beets.
These requests for European funds have also been requested from Brussels by the Minister of Agriculture, Fisheries and Food, Luis Planas. At the moment, the aid is basically fiscal. On April 25, the Government gave the green light to a reduction in personal income tax for nearly 800,000 farmers and ranchers, to deal with both the impact of the drought and the war in Ukraine, valued at 1,800 million euros. But it remains to be done. Last Thursday, Planas assumed that the Ministry is working on new support measures for the primary sector as a whole against drought and rising prices, but they are still to be specified.
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