The Confederation of Business Associations of the Balearic Islands (CAEB) has today published the Economic Evolution report for the second quarter of 2023. It states that the Balearic Islands economy grew by 3.9% from April to June. This rate, although 2.5 percentage points lower than the growth experienced in the previous quarter (6.4%), allows to reduce the ‘hole’ dragged by the Balearic Islands since the pandemic on the way to the levels of activity of 2019 (-2.4% vs -3.2%, 1st quarter). In this way, the archipelago is once again in the deceleration phase that it has maintained throughout 2022 and closes the brief upward hiatus that opened during the first three months of the year. “The good start to the tourist season has allowed us to keep up better than the rest of our competitive environment,” says Carmen Planas, president of CAEB.
The Balearic economy has followed the downward trend of the main European economies, both in the Spanish economy as a whole (1.8% vs. -4.2%, 1st quarter) and in the European Union (0.4% vs. 1.1% 1st quarter). In Europe, this slowdown was felt among the main economies such as Italy (0.4% vs. 2.0%, Q1) or Belgium (0.9% vs. 1.3%, Q1) and, even, some entering negative territory such as Germany (-0.1% vs. -0.3%, Q1), the Netherlands (-0.1% vs. 2.1%, Q1) or Poland (-1.4% vs. 0.6%, Q1).
Territorially, all the islands returned to the deceleration path from April to June, although Eivissa and Formentera once again recorded a more favourable balance by boosting their economies (4.3% vs. 7.1%, 1st quarter) over Mallorca (3.9% vs. 6.3%, 1st quarter) and Menorca (3.2% vs. 5.8%, 1st quarter). Menorca and Mallorca are the islands that are closest in the process of normalisation of pre-pandemic activity levels (-2.2%).
The services sector once again emerged as the main engine of the economy and recorded an increase of 4.2% (vs. 6.8%, 4th quarter), taking advantage of the good tone of activity in the tourist sector over the Easter period and the start of the summer season, where new record highs were reached in most economic indicators. For its part, construction remains for the second consecutive quarter as the only economic sector in the Balearic Islands with activity above pre-pandemic levels, registering growth of 3.3% (vs. 5.8%, 1st quarter). On the other hand, industry is the sector where the weakening of the growth path was most evident, moderating to 1.0% (vs. 1.9%, 1st quarter), clearly affected by global factors and, especially, by the sudden deterioration in foreign demand.
The Balearic Islands face the second half of 2023 in a global context that makes it difficult to sustain growth, so it is to be expected that the Balearic economy will continue to slow down. However, this growth path will continue to be above that of its competitive environment thanks to the strength of employment levels and because the islands have the support of tourism, which during the high season is being characterised by record volumes of activity.
According to CAEB, over the coming months, the Balearic economy will have to continue to navigate in a context in which inflation will remain above the ECB target (2%) and will continue to erode the purchasing power of consumers.