The uncertainty that the Catalonian referendum has sparked over independence from Spain is likely to result in a slowdown in FDI, economic experts say. Jason Mitchell reports.

Catalonia’s informal independence referendum on October 1 will create economic uncertainty and lead to a short-term reduction in FDI, according to economists.

Catalonian president Carles Puigdemont said on October 4 that his government would declare the region’s independence from Spain very shortly. Some 90% of the 2.2 million voters who took part in the informal referendum backed independence. However, Spain’s central government in Madrid has described the plebiscite as illegal, while the EU said it was an internal matter for Spain to resolve itself.

“I think the referendum and all the uncertainty around independence will put off investors for at least a few months,” said Stephen Brown, European economist at London-based economics consultancy Capital Economics. “It is bound to have some impact on business sentiment.”

Mr Brown expects the Spanish government to grant the autonomous region more fiscal powers to appease the independence movement, though it is not clear if that would be enough. 

The Catalonian government said the referendum vote has been on the cards for a while and believes that investors have become accustomed to the chance of Catalonia becoming independent.

“I think most investors will know Catalonian history. They will know that this independence process has been happening for a long time,” said Natalia Mas, director-general of economic analysis at the government of Catalonia “Catalonia is very much open to dialogue and we very much expect pragmatism to prevail.”

Joan Romero, chief executive officer at Catalonia Trade & Investment, the region’s inward development agency, said: “A new political stage now opens in Catalonia. In this period, international mediation could help to reduce the time period. And during this democratic process, from Catalonia Trade & Investment, we reinforce our commitment so that international companies can find a climate of security, stability and confidence in Catalonia.”

The region is home to 16% of Spain’s population, 7.45 million people, and is one of the wealthiest parts of Spain. Its economy is expected to expand by 2.9% this year and its €215bn ($253bn) GDP makes up a fifth of the Spanish total. In both 2015 and last year, it attracted €5bn in FDI, around a quarter of the country’s total.

A total of 7086 multinational companies are based in Catalonia, including 977 from Germany and 899 from France. It is home to 36% of all the multinationals with a Spanish presence. Amazon, for example, is investing €268m in the region, partly in robotics research, and creating 3725 direct jobs.

This article is sourced from fDi Magazine
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