Executive Summary

Analysis of territorial competitiveness is important for identifying and implementing the most suitable policies to support socioeconomic development. It is interaction between firms and their environment that generates innovation, wealth and, ultimately, wellbeing. The aim of this analysis of the competitiveness of the Basque Country is to understand what determines the effectiveness of the firms located here to compete and so generate economic and social value. Competitiveness is not an end to itself, but a means of generating wellbeing among the population and a key lever to achieve the Sustainable Development Goals set by the United Nations.

The analysis in the report is structured around the competitiveness framework developed by Orkestra and used in Basque Country Competitiveness Reports since 2011. This evolving framework distinguishes between four levels: (i) ultimate outcomes of territorial competitiveness, reflecting overall goals in terms of citizen wellbeing; (ii) intermediate performance indicators, important in achieving those outcomes; (iii) determinants of competitiveness related to business performance/behaviour, territorial and cluster specialisation, and the quality of the business environment; and (iv) the endowments, or fundamental characteristics of the territory.

The report analyses over 50 indicators across these four levels, using the latest data available to compare the Basque Country with other European regions and countries, including a group of 30 reference regions with similar structural characteristics. The report is accompanied by an online platform that enables users to interact with the report and to develop their own graphics by selecting different time-periods and comparators.

The overall impression from the analysis of the report is of a Basque economy that continues to improve in many areas relative to other European regions, and that is delivering results for its citizens in terms of economic and social wellbeing. The positive evolution of social outcomes suggests that the recovery is proving to be fairly inclusive, but still poor employment and unemployment indicators hint at diverse realities behind the headline figures. Caution is also urged given the strong cyclical conditions in Europe that have accompanied the indicators analysed in recent years. The weakening of these "tailwinds" is likely to have a particularly strong impact on the economy of the Basque Country, due to its areas of specialisation and, in comparison with other European regions, a higher level of indebtedness, greater dependence on external indebtedness and high rates of openness in its economy. More generally there are also major uncertainties ahead related to demographics, the environment, resources, social cohesion, new models of employment relationships and geopolitics.

The relative position of the Basque Country has deteriorated in several indicators, and is a particular concern with regards the group of reference regions. This suggests the need for continual monitoring, analysis and action in several areas. It is important to continue to focus on some of the ‘weak spots’ that are already well-known and particularly evident in small firms in the Basque Country. In general this means continuing to improve in innovation, productivity, internationalisation and strategic investments in key areas of specialisation.