Bankia S A : The significant weight of trade and the low technological intensity of the industry limit the response of the Valencian economy to the Covid pandemic

• The GECE Observatory, promoted by Bankia and the Ivie, analyses and compares the capacity of the Spanish regions to withstand the economic crisis generated by the coronavirus pandemic
• The Valencian economy departs from a weak position in terms of the level of business competitiveness and has a sector structure with great reliance on trade and with low technological and knowledge intensity
• The business fabric of Navarra and País Vasco are the ones in the best standing to cope with the situation due to the combination of high business competitiveness and a diversified and technological sector structure
• The Canary Islands and the Balearic Islands face the crisis weighed down by their high dependence on the tourism sector, but they have 11.3% more highly competitive companies than the national average, which will favour their resilience and subsequent recovery

The strong weight of trade and the low technological intensity of the Comunidad Valenciana industry limit the response of the region's economy to Covid-19, as can be seen from the latest report by the Observatory on Government, Strategy and Competitiveness of Companies (GECE), promoted by Bankia and the Instituto Valenciano de Investigaciones Económicas (Valencian Institute for Economic Research, Ivie), which analyses and compares the capacity of the Spanish regions to resist the economic crisis generated by the coronavirus pandemic.

The Comunidad Valenciana is strongly conditioned by a deficit of highly competitive companies. It has 1.7% fewer companies considered to be highly competitive than the national average, a gap that shows no sign of increasing. The highly competitive companies in the region are also strongly concentrated in the commercial sector, one of the most affected by the restrictions imposed due to Covid-19. Nor is the presence of highly competitive companies from Valencia, Alicante and Castellón in sectors that are technological and knowledge intensive.

In addition, the weight of the wealth generated and the employment created by these companies, which are the most resilient in the face of difficult economic situations, has fallen by 3 percentage points in the last five years at a national level, but in the Comunidad Valenciana this decrease has been a great deal more significant, with 7.4 points less as regards added value and 5.5 points less in so far as employment.

According to Alejandro Escribá, an Ivie researcher and professor at the University of Valencia who has directed the report, 'the crisis caused by Covid-19 is a great challenge that has highlighted the strengths and weaknesses of companies in each region'.

'In the case of the Valencian economy, the relative scarcity of highly competitive companies, the considerable relevance of trade (offset in part by the strength of the agri-food trade), the low intensity of technology and knowledge, and the insufficient business size are unresolved issues that reduce the response capacity. These weaknesses have persisted for years, and this crisis is a new opportunity to face a decisive change in the sector model and to support business growth', underlined Escribá.

The report states that the autonomous regions that have a higher percentage of companies with high levels of competitiveness and that, in addition, have a diversified business fabric and with companies of greater size and technological intensity are the ones that can best respond to the Covid-19 crisis. In Spain, seven regions are above the average in terms of their percentage of highly competitive companies. The Islas Canarias stands out, with 11.3% more competitive firms, followed by Navarra, Islas Baleares, País Vasco, La Rioja, Cataluña and Madrid.

In Spain as a whole, Navarra and País Vasco are the communities in a more favourable position to face the current situation, given that, on the one hand, they are among the regions with the highest percentage of highly competitive companies (8.3% and 5.9% above the average, respectively), and on the other, these highly competitive companies have a diversified sector specialisation, with a strong focus on technology and knowledge.

Madrid and Cataluña are at an intermediate level to face the crisis, with global levels of business competitiveness slightly above average. In addition, their most competitive companies also belong to sectors with high knowledge intensity or highly technology intensive industries.

By contrast, Islas Canarias and Islas Baleares stand out for having a percentage of companies classified as highly competitive, well above the average (11.3% and 7.2% more, respectively). However, these companies are strongly focused on the tourism sector, with the hospitality industry being the main generator of added value. This specialisation places them in a more fragile position due to the mobility restrictions and activity limitations arising from the pandemic.

In this case, the short-term impact of Covid-19 will be more intense, but if the crisis does not persist over an excessive period of time, many companies are well positioned to resist and recover their activity when the health situation is resolved.