OREANDA-NEWS. Fitch Ratings says The Historical Territory of Alava (Alava; A/Stable/F1) is facing growing pressure from social spending, due to an increasing population, including the elderly. However, as one of the top-performing Spanish provinces, Alava is also well-placed to address this challenge, particularly in view of its fiscal and financial autonomy.

Out of Alava's population of around 324,000 in 2015, 19.5% was over 65 years old (15.7% in 2001) while 2.9% was over 85 years old (1.7% in 2001). The Social Welfare Institute is in charge of providing services to the elderly and disabled, among others. Its budget expanded to EUR184.2m in 2016 (EUR131.m in 2005), or 40% of Alava's adjusted budget, with these services taking a 21% share. The Institute employs over 1,405 people and in 2014 it directly managed nine residences for elderly with 766 beds, while the population of over 85 years old was 9,255 in 2015.

The dispersed distribution of population in the province could also create, albeit limited, pressure on Alava's spending, given the transfers the administration has to make to small and medium-sized municipalities. Alava has 48 out of 51 municipalities with a population or less than 5,000 inhabitants each. However, 75.4% of Alava's population lives in the City of Vitoria, the capital of the province and the region, resulting in service-provision efficiency.

Between 2003 and 2013 Alava's operating revenue grew 2.8%, slightly below the province's economic growth of 3.5%. Since at least 1995, Alava's GDP per capita has been the highest among the 52 Spanish provinces and in 2013 was 50% above the national average. The province has large manufacturing and public sectors, and limited exposure to the construction sector. For 2016 and 2017, Fitch expects Alava's economy to grow in line with Spain's 2.6% and 2.2%, respectively, in real terms, supported by domestic and external factors.

Industry accounted for 31.8% of provincial GDP in 2013, as Alava is home to large export-oriented companies involved in manufacturing. The public sector is also an important contributor (20.7% of provincial GDP in 2013), as the City of Vitoria is home to many head offices.

Alava's labour market is less volatile than that of Spain because of the presence of a large manufacturing sector and an extensive public sector and decreasing reliance on the construction sector. The employment rate was 50.6% in 2015 (46.4% in Spain) and the province's ongoing economic recovery should support job creation.