The economy of the Balearic Islands grew by 2.9 percent during the first quarter of the year, surpassing the national average, driven mainly by tourism spending and revenue from the services and construction sectors.
This is evident in the economic outlook for the Balearic Islands for the second quarter, which was presented on Thursday at a press conference by the Vice President and Regional Minister of Economy, Finance and Innovation, Antoni Costa, and the Director General of Economy and Statistics, Catalina Barceló.
The archipelago’s GDP is growing, they indicated, driven by a labor market that remains at record levels, with an average of more than 588,800 workers registered between January and June, and by a 2.6 percent increase in revenue in the services sector, along with an increase in activity in the construction sector.
The increase in tourism spending is also noteworthy, which reached €5,861 million in May (+4.3 percent).
Barceló also highlighted the “robust” figures for the construction sector, with housing starts reaching their highest level since 2008. Specifically, during the first quarter, the number of housing starts increased by 31.6 percent year-over-year, while the number of completed homes grew by 17.5 percent.
Unexpected acceleration
The regional minister emphasized that the archipelago’s economy, far from slowing down as had been expected the previous quarter, is now gaining momentum. However, Costa expressed concern about the inflation figures, which, although stable, stand at 3.5 percent.
All sectors are on the rise, especially construction (+3.1 percent) and services (+2.9 percent), and all islands also experienced an increase in activity during the first quarter: Mallorca grew by 3 percent, while Menorca and the Pitiüses Islands recorded a 2.8 percent increase.
As for prices, transportation and the hotel sector account for the bulk of the increase in the CPI, which rose by 3.4 percent in May, while the year-over-year change for all of Spain stood at 3.2 percent.
Underlying inflation has also increased (+3.3%), with a difference of 0.3 percentage points compared to Spain (+3%). “It should be recalled that 83 percent of households in the Balearic Islands have felt the impact of the war in Iran on their purchasing power, according to the Estudios de Opinión de las Islas (EOIB) survey,” emphasized Vice President Costa.
Tourist spending at a historic high
Meanwhile, tourist spending has reached a new record, totaling 5.861 billion euros through May, with a year-over-year increase of 4.3 percent from January to May and an average spending per person per day of 194 euros (+4.6 percent).
Value growth is becoming increasingly consolidated, as tourist arrivals increased by 3.3 percent through May, reaching 5.4 million tourists. “However, overnight stays remain stable and the average length of stay continues its usual downward trend, as overnight stays decreased by a moderate 0.3% through May and the average length of stay fell by 3.5% to 5.6 days,” Barceló explained.
At this moment, Regional Minister Antoni Costa pointed out that the increase in human pressure is not due to tourists, but to population growth, since the variable used is the number of overnight stays – which is decreasing – rather than the number of tourists.
Service revenues through April increased by 2.6 percent, compared with 5.0 percent growth for Spain as a whole, as growth slowed in April, mainly due to the hospitality sector.
Retail trade has recorded five consecutive months of year-over-year declines, with a 1.6 percent drop through May, while in Spain it rose by 1.9 percent.
As for the industry, although there has been a decline in industrial production – with an average drop of 6.2% in the Islands, while in Spain it has increased by 0.6% – the other indicators are positive.
In this regard, underlying growth in economic activity has driven real electricity demand up by 3.7 percent through May.
“It is noteworthy that the share of renewable energies has increased by 1.7 percentage points and now represents 16.5 percent of the total,” Barceló added.
The export sector is growing
Moreover, although total exports fell by 16.7 percent, the traditional export sector held up well and grew by 3.2 percent during the first four months, reaching €109 million. Its share of total exports has also increased (to 18.1 percent).
Finally, regarding employment, the number of people affiliated with Social Security continues to increase, reaching a new all-time high, with an increase of 3.0% during the first half of the year (588,858 workers affiliated) and an increase of 15.1% between 2002 and 2026.
The services sector is the main driver of employment growth (+3.1 percent during the first half of the year, raising the total number of registered workers to 476,026).
That said, the construction sector is leading job growth, with a 3.8 percent increase to 63,026 registered workers, Barceló said. There has also been a significant increase in agriculture (3.6 percent) and a more moderate increase in industry (1.2 percent).
