Spain | Balearic Islands Economic Outlook 2022

The GDP of the Balearic Islands would have grown by 10.5% in 2021. The sanctions imposed on Russia and the increase in fuel prices reduce growth expectations. Even so, Balearic GDP could increase by 7.1% in 2022 and 5.0% in 2023, making the Balearic Islands the most dynamic region in the three-year period 2021-2023.

Key points

• Key points:
• GDP growth in 2021 was boosted by the recovery in tourism, spending by Balearic households and companies, as well as the impact of public policies, both from the central and regional governments.
• Although the increase in activity will continue to be high in these two years, the consequences of the invasion of Ukraine will weigh on the recovery. In any case, GDP in the Balearic Islands could reach 7.1% in 2022 and 5.0% in 2023, which would make the island economy the fastest growing in Spain over the three-year period.
• Several factors suggest that tourist numbers and spending levels during the peak season will be similar to or higher than those observed before the pandemic. These include reduced health uncertainty, the use of savings accumulated during confinement, and the attraction of visitors seeking destinations that provide security.
• The Balearic economy has already recovered pre-crisis employment levels, while the unemployment rate will fall below 10% in 2023. In any case, GDP will only recover to pre-crisis levels by the end of next year.
• Public policies will be key to minimising the effects of the war. The fall in electricity prices will be important. In the absence of a rent pact, the uneven impact of inflation may increase social unrest. Uncertainty persists about investment linked to the NGEU and spending could leak into higher imports in the face of supply constraints.

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