21st November 2021
The 2021 Competitiveness Report, prepared by Orkestra with the collaboration of the SPRI Group, analyses how the Basque Country is positioned in terms of wellbeing, how its economic and business performance is evolving and what the levers will be for its future competitiveness.
The analysis was presented to the media today by the Rector of the University of Deusto, José María Guibert; President of Orkestra, Iván Martén Uliarte, General Director of Orkestra, Mari Jose Aranguren, and senior researcher, Susana Franco.
Wellbeing and economic/business performance of the Basque Country
In this report Orkestra proposes a new framework that incorporates a series of essential dimensions when identifying the keys to competitiveness for wellbeing in the Basque Country. The analysis of these dimensions shows a positive image of wellbeing in the Basque Country, mainly in terms of life satisfaction, learning and health, and identifies some aspects for further work, particularly in relation to employment and the environment:
- The Basque population shows high satisfaction with social and material life. Despite the pandemic, life satisfaction in the Basque Country has improved slightly. Trust in people has also progressed in recent years and is on a par with the reference regions, an important element for the cooperation dynamics necessary for transitions.
- The Basque Country is particularly well positioned in lifelong learning and the proportion of the population with higher education (upper secondary or tertiary) has had a positive evolution.
- In terms of health, life expectancy at birth is above that of the other territories analysed and self-perceived health status is above the European and German average.
- The unemployment rate has improved to below 10% in both 2019 and 2020 but there is still room for improvement compared to the EU-27 average and other European industrial benchmark regions.
- In terms of the environment, there have been improvements in terms of air quality, but there is still room for improvement in greenhouse gas emissions.
- Finally, there are significant challenges in terms of inclusiveness as indicators show a gender gap that disadvantages women in terms of sense of security and wages.
The industry-focused territorial strategy carried out in the Basque Country in recent decades has left the territory in a good position to face the crisis caused by COVID-19. In fact, despite the pandemic, the Basque Country is still among the regions in Europe with the highest level of GDP per capita and the lowest level of population at risk of poverty or social exclusion.
However, although the region's competitiveness basics are well consolidated, the economic and business performance shows the impact of the pandemic and identifies several elements to be taken into account for recovery:
- Productivity per hour worked in the manufacturing industry is higher in the Basque Country than in Spain and the EU-27, but there is still a weakness compared with Germany and the benchmark regions.
- The unit labour cost (ULC) of the Basque Country is below that of the other reference territories. However, in the manufacturing sector it is above Spain and the EU-27 for the first time since 2017.
- Innovation in SMEs has improved but there is still some way to go compared to the European average.
Exploring the levers of competitiveness in the Basque Country
As a new feature, this year's report incorporates the analysis of six dynamic levers that indicate where strategies and policies should be focused in order to generate improvements in both business competitiveness and wellbeing. In each of them, the report identifies the strengths of the Basque Country and some of the future challenges.
Natural capital: the weight of industry in the Basque economy and its high energy consumption mean that the main challenge in this area is to move forward in an orderly fashion to achieve zero net emissions with the lowest social impact. However, the energy-environment transition also generates opportunities for the business fabric and very competitive value chains are being developed in the Basque Country in areas of the energy sector such as renewable energies. In addition, employment in the environmental sector has grown.
Physical capital: the Basque Country has a strong industrial investment culture and the proportion of investment in machinery and capital goods has continued to grow. However, in general, investment levels have fallen in relation to GDP and it is necessary to recover higher levels prior to the 2008 crisis.
Financing: Basque companies have a highly capitalised profile, with a greater weight of net worth than Spanish and European companies. Moreover, Basque public administrations came into the pandemic in a relatively favourable position. Even so, there is some difficulty in attracting foreign investment.
Knowledge: the Basque Country has made progress in digital transformation and has been gaining ground compared to other European countries. On the other hand, R&D expenditure as a percentage of GDP is lower than the European average.
Human capital: strengthening learning in areas linked to transitions will be essential to foster employment and improve activity rates, particularly among women and young people. On the positive side, the Basque Country continues to outperform the European average in lifelong learning.
Social and institutional capital: the level of business cooperation in the Basque Country is above the European and German average. The challenge for the future will be to leverage this level of collaboration and involve other agents to tackle ambitious projects related to the challenges and opportunities of the transitions.