Aragon’s economy grows but slows down due to employment, productivity and geopolitical risks

Aragon’s economy grows. The forecast is that the community’s economy will close 2024 with a growth of 3%, placing it slightly above the Spanish average estimated at 2.9%.

This growth is estimated by the better performance of the economy this year, according to the data already known for 2024, which has caused the forecast for the end of this year to be raised by five points in Ibercaja’s economic report. A trend that has also occurred at the national level by seven points above the previous estimate made by the financial entity.

The good performance of the Aragonese economy comes mainly from service exports – linked to the containment of imports – and consumption, especially private consumption given the positive evolution of employment and salaries.

Furthermore, price containment, especially in food, has also favored this evolution, as well as the better financial situation of households, which accumulate savings levels and financing capacity.

The less positive side is observed in the sluggishness of investment in companies, which makes it difficult to improve productivity to guarantee future growth and the deterioration of their margin, although it is contained. Precisely, in Spain productivity per worker is 13 pp lower than the euro zone average and 30 pp lower than that of the United States, says Santiago Martínez, head of Economic and Financial Analysis at Ibercaja.

Presentation of Ibercaja’s Aragonese Economy Magazine. | Photo: Ibercaja

And the forecasts are also positive for the year 2025, in which the growth of Aragon’s economy is expected to be 2.1%, in this case being below the 2.5% expected for the country as a whole.

This lower growth points to a possible slowdown due to several factors. One of them is the exhaustion in job creation – vigor is being lost from the high growth rates previously recorded – due to the reduced financial flexibility of companies when it comes to facing new hires in a context of rising employment prices due to the salary increases in recent years and by the working-age population.

This means that the forecasts for the occupancy rate show a slight loss of dynamism both in Aragon (1.8%) and in Spain (2.2%) and this is perceived more markedly in the estimates for 2025, a year in which which is contemplated at 1.4% for Aragon and 1.8% nationally.

The lower dynamism is also perceived in the evolution of the unemployment rate both for this year and the next, especially due to the lower growth of the active population (national average variation of 7.3% between 2024 and 2029 in the variation of the population between 30 and 35 years old). Consequently, it is estimated that the unemployment rate in Aragon in 2024 will be 8.1% (11.6% in Spain) and, by 2025, 7.9% (11.2% in the whole of the country). country”.

Another key factor is the limited increase in productivity expected after the insufficiency of both public and private investment in recent years. However, “the main risk for the economy is the geopolitics that will condition the year 2025, 2026 and beyond due to war conflicts and tariffs” because “everything about the pandemic has been redirected,” indicates Enrique Barbero, director of Communication, Brand and Institutional Relations of Ibercaja.

The impact may come especially from economies such as the United States with the arrival of Donald Trump again to the presidency and the application of his tariff policies, the evolution of China’s economy and the situation also in Europe – it shows atony – and, in specifically, from countries like Germany, with a “flu-like economy”, and France with political and social uncertainty and a risk premium but above that of Italy and Greece. Precisely, France and Germany are Aragón’s two main client countries. It is a context that also generates uncertainty.

At this juncture, the Aragonese community has potential due to the investments announced throughout 2024, which total around 40,000 million euros, which are also diversified “with American, Chinese and European companies,” says Barbero.

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Aragon’s economy grows but slows down due to employment, productivity and geopolitical risks