Published on Wednesday, February 15, 2023

Spain | Canary Islands Economic Outlook 2023

The GDP of the Canary Islands will increase by 10.7% in 2022. We forecast an increase of 2.8% in 2023 and 3.3% in 2024, which will enable the creation of 69,000 new jobs between 2022 and 2024.

Key points

  • Key points:
  • The most recent information forces to revise the growth of 2022 to 10.7% in the Canary Islands (5.5% in Spain), with the tourism sector as the driving force behind this boost. Growth was well above the national average, where GDP rebounded by 5.5% last year, and will continue to grow at higher rates in 2023 and 2024.
  • The recovery of tourist spending by foreign visitors has given a differential boost to the Canary 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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