Spain | Balearic Islands Economic Outlook. 2025

Summary

In 2024, the Balearic Islands' GDP could have grown by 3.5%, and is expected to increase by 3.2% in 2025 and 1.6% in 2026. This strength is explained by foreign tourism, which remains strong but is approaching the limits of its capacity, and by domestic demand in which consumption is beginning to gain prominence.

Key points

• Key points:
• If these forecasts come to fruition, a positive growth differential with respect to Spain as a whole would be maintained in 2025, and in 2026, regional GDP would exceed 2019 levels by 15 percentage points. Furthermore, the unemployment rate could fall to an average of 8.5% in 2026, and 17,400 new jobs could be created in the two-year period 2025-2026.
• The employment boom was concentrated on the island of Mallorca and in Ibiza and Formentera.
• Lack of investment, particularly in the housing market, is a bottleneck to growth, especially in urban areas. Rising labor costs can slow job creation. Aging restricts the contribution of domestic consumption, hinders labor market participation, and increases dependence on immigration, which is concentrated in low-productivity jobs
• The outlook is conditioned by a particularly uncertain environment dependent on the global context. Tourism faces uncertainties related to stagnant European demand, possible changes in German fiscal policy, the impact of potential US tariff increases, changes in energy costs, and general economic policy uncertainty.

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