Spain | Balearic Islands Economic Outlook 2026

Summary

The Balearic Islands maintain strong growth but face a slowdown amid weaker tourism and structural constraints. Employment and domestic demand support growth, while housing, productivity and capacity constraints persist.

Key points

• Key points:
• GDP grew strongly (3.2% in 2025) and is expected to moderate to 2.5% in 2026 and 2.0% in 2027. The economy continues to outperform historical averages, driven by services, though momentum is easing after the recent expansion cycle.
• Tourism shows signs of weakness: foreign spending stagnates and overnight stays barely grow. Early 2026 data confirms the slowdown, with weaker performance compared to other destinations and a sharper correction in domestic tourism.
• Greater reliance on domestic demand, with consumption supporting growth. Rising wages and improved financing conditions are boosting household spending, partly offsetting the softer external sector.
• Employment continues to grow strongly, supported by immigration and services. Hospitality, retail and the public sector lead job creation, although labor shortages are beginning to emerge.
• Structural bottlenecks persist: housing, energy and tourism capacity constraints. Limited housing supply, capacity limits in tourism and the need for energy investment may weigh on future growth.

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