OREANDA-NEWS. In a new report, Fitch Ratings examines the characteristics of the economy of the Spanish autonomous community of Murcia. Located in the Mediterranean axis, Murcia only accounts for 2.2% of the Spanish territory, and has experienced massive demographic development over 2001-2014 with 23.2% growth, above the 13.75% for Spain.

Given that main responsibilities of autonomous communities include healthcare and education, the increase in the population has had a large impact on the level of services and thus spending. The structure of the population is also relevant, and the share of people aged above 65 years is 14.75%, 3.3% lower than Spain's, which means there is less pressure on healthcare than the other autonomous communities. The distribution of the population is also favourable as Murcia has a quite high density (129 inhabitants per sq. km vs. 92 in Spain) and also more than 80% of its citizens live in towns of at least 20,000 inhabitants against a national average of 68%. Only two of the region's 45 municipalities have fewer than 1,000 inhabitants, compared with approximately 60% of municipalities nationally.

The socio-economic profile influences the tax base, which is relevant for the autonomous communities, as they receive a significant share of personal income tax and VAT. Murcia had GDP of EUR27.12bn in 2014, and the nominal GDP CAGR during 2001-2014 was 4.3%, higher than the national average of 3.2%, in particular thanks to the strong demographic rise. The region suffered deeply from the economic recession, partly because of greater exposure to the construction sector (12.2% of regional GDP in 2008). The economy resumed growth in 2014 and GDP improved 0.9% in nominal terms, the same rate as nationally.

The construction sector shrunk by more than half in gross value-added over 2009-2014. However, energy and chemical-related activities are progressing as several long-term investments have been made, so its value added doubled over 2008-2013 to EUR0.9bn. The tourism sector is an important contributor, and its 2014 performance was positive with 2.7% growth.

Murcia's housing stock grew fast during the construction fever in Spain - by 25% over 2001-2008, to cover growing domestic and foreign demand for tourism real estate, in particular in coastal areas large scale projects took place. The sudden demand drop after 2008, and the surplus generated from previous years, resulted in a price fall of 37% over 2008-2014, versus 29.5% for Spain. Housing prices are currently 47% below the national average. Prices reached a low in 2014 and are expected to have stabilised in 2015. The region is well connected and has developed its land transportation network over the last two decades. This will be complemented by the completion of the high speed train, expected in 2016.

Murcia's labour market is more volatile than nationally because of its higher exposure to the agricultural sector and the weight of the construction sector in the past. The employment rate was 44.9% in 2014 (45% in Spain), and the regional administration has a focus on employment promotion. Labour costs in Murcia were also 10.4% below the national average in 2014.

The full report, titled Murcia's Regional Economy is available at www.fitchratings.com.