Executive Summary

The majority of the final outcome indicators for the Basque Country, both economic and social, have improved, and generally speaking, the region remains in a favourable position. This suggests the existence of a balanced model of socioeconomic competitiveness in line with what is referred to as ‘competitiveness in solidarity’.

The Basque Country faces a major challenge related to unemployment, especially among the youngest segment of the population and those over the age of 55. To this we may add that in aspects such as temporary and part-time work, the quality of new employment contracts has not improved significantly with the recovery from the crisis.

In determinants of competitiveness, the Basque Country is in a good position with regard to business environment indicators thanks to strong institutional quality, policies and strategies implemented, and individual training and education levels, among other aspects.

In terms of firm performance, productivity and cost indicators show positive results. When looking at the financial aspect, firms have shown themselves to be risk-averse, they have continued to reduce their debt level and consolidate their equity. In innovation, they show relative strength in technological innovation (primarily process innovation), and weakness in non-technological innovation (organisational and marketing) as well as in the combination of the two types of innovation. Despite modest results in some innovation indicators, the strong performance of the Basque Country in the sales of new products indicator is noteworthy. We have also observed that there is a core group of firms, particularly industrial and larger firms, that engage in significant innovation activity.

The last year saw a consolidation of internationalisation among Basque firms, with positive growth in their export levels, and an increase in both the average value of exports and the percentage of regular exporters. There has, however, been a decline in the number of exporters.

There are several global trends (ageing, digitisation and automation of production processes, climate change, etc.) which pose serious challenges for maintaining and improving levels of wellbeing. To this must be added the fact that the primarily socio-political uncertainties – which nonetheless have an undeniable economic dimension and impact – of which the last competitiveness report warned, have not only been confirmed, but have even been accentuated. These include the greater likelihood that Brexit will take place and the possibility that no agreement will be made in this regard; the expansion of the trade wars initiated by Trump into other spheres such as foreign exchange and technology; and the instability in Latin America (Argentina, Brazil, Venezuela, Colombia, etc.). For this reason, more than ever, proactive policies are needed that foster adaptability, new pathways and the diversification of the economic structure.

Taking advantage of the healthy financial situation and positive financial leverage of firms, we should continue moving forward on driving innovation, especially in such areas as the education and training of workers and improvements in the skill level of their positions, continue with restoring job quality, increase R&D and innovation activity at firms (especially non-technological), and consolidate the internationalisation of Basque business, both in the number of exporters and the volume of their exports.