Published on Tuesday, February 21, 2023

Spain | Balearic Islands Economic Outlook 2023

The GDP of the Balearic Islands increased by 10.7% in 2022. We forecast an increase of 3.1% in 2023 and 3.2% in 2024, which will allow the creation of 39,000 new jobs between 2022 and 2024.

Key points

  • Key points:
  • The economy maintained an exceptional growth rate of 10.7% in 2022 in the Balearic Islands (5.5% in Spain), with the tourism sector driving this momentum. Growth was again well above the national average, where GDP rebounded by 5.5% last year, and will continue to grow at a higher rate in 2023.
  • The recovery in tourist spending, by foreign and national visitors, has given a differential boost to the Balearic Islands, which is reflected in spending with BBVA credit or debit cards or at BBVA POS terminals that exceeds pre-pandemic levels.
  • The stagnation of the Eurozone and the possible impact of rising rates on domestic demand will reduce the positive contribution of external demand to growth in 2023 and 2024. Household spending will be affected by rising prices, increased uncertainty and the slowdown in employment. In addition, tourism faces the challenge of the European slowdown in a context of higher transport costs and increasing competition from competing destinations.
  • Activity will gain traction as NGEU funds are executed and uncertainties fade. The correction in inflation will continue and there appear to be no problems in gas supply. Businesses and households are better prepared to face a more volatile environment. No imbalances in economic sectors are observed.
  • The factors that could deteriorate the scenario continue to be numerous. Geopolitical tension could spread. The lack of an income pact could lead to inflation remaining high. There is a need to provide certainty about the tax burden and the sustainability of public finances. Lack of adequately educated human capital is a constraint to business growth.

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