The Confederation of Business Associations of the Balearic Islands (CAEB) published this Monday the economic development report corresponding to the second quarter of 2024, which indicates that The economy of the Balearic Islands grew by 2.8% from April to June, losing two tenths compared to the growth rate of the first quarter (3%).
The economy of the Balearic Islands is thus showing signs of exhaustion, despite a record tourist season, moving away from the general trend of acceleration observed in a good part of the countries in its competitive environment that have benefited from the new stage of monetary easing, the solidity of the labor market and the gradual moderation of inflation.
The archipelago’s economy is running out of steam compared to the beginning of the year and is heading into a summer where it has continued to slow down despite a record tourist season in terms of visitor influx.
The CAEB stressed that the evolution of the region’s economy contrasts with the strengthening of the economy of Spain as a whole. (2.9% compared to 2.6% in the first quarter) and the European Union (0.8% compared to 07% in the first quarter). By territory, Majorca has regained the leadership in growth from the Balearic Islands (2.9% compared to 3%), with Ibiza and Formentera showing a clear and significant slowdown (2.8% compared to 3.6%). Minorca, the furthest behind, has managed to escape the general trend of deceleration although it is the one that continues to grow at the lowest rate (1.7% compared to 1.3%).
The slowdown in activity in the Balearic Islands was also evident in the labour market, where a moderation in job creation was confirmed between April and June (3.6% compared to 3.9%), although the archipelago continues to have stronger momentum than at the national level (2.6% compared to 2.7%).
In fact, the greater strength of job creation allowed the month of June to close in the Islands with the the largest number of active workers in its entire history. All this has reduced unemployment to 4.2% of the active population.
Inflation continues to be a concern after the rebound in the second quarter (3.7% against 3.1%), a consequence of the resumption of the rise in the prices of energy products and the new rise in the prices of services, which continue to show a clear downward trend. a resistance weighed down by continued wage increases.
The CAEB highlighted disinflationary advances at the beginning of the third quarter. With the latest known data, the CPI moderated its rise in July (2.9%) and August (2.3%), not only in the Balearic Islands or at the national level (respectively 2.8% and 2.3%), but also in the Community. (respectively 2.8% and 2.4%) and American (respectively 2.9% and 2.6%).
Services, the driving force of the Balearic economy
From a supply perspective, the Balearic economy moderated growth in many of its main sectors of activity during the second quarter, weighed down by growth that is beginning to show clear signs of reaching a peak.
The service sector has once again become the mainstay of the Balearic economy and recorded a growth of 2.9%, after demonstrating good dynamics in tourist activity volumes during the months of May and June.
At the same time, industry remained, for the seventh consecutive quarter, the least dynamic activity in the Balearic Islands, lowering its growth rate to 1.1% compared to 1.3% in the first quarter, affected by a new moderation in demand, conditions of access to financing that are still restrictive and a general tendency to contain current production in order to sell off still high stock levels. On the contrary, construction was the only sector to escape the general slowdown trend and to show growth of 3.5%.
In demand, private consumption was once again the most dynamic fraction of domestic demand during the second quarter of 2024 (2.6%) thanks to the good start of the tourist season and the recovery in real incomes due to the strength of employment and the moderation of demand. inflation.
At the same time, investment continued to strengthen its growth between April and June (2.4% against 1.8% in the first quarter), supported both by the recovery of investment in construction and by the emerging easing of conditions for access to financing.
All this in a context where external demand has once again increased its positive contribution. thanks to new records for exports of tourist services (6.367 million euros of tourist expenditure), as in the trade balance of industrial and agri-food goods (374.5 million euros surplus).
The Balearic Islands face the second half of the year by highlighting that their current growth pattern, based mainly on the accumulation of production factors, is reaching its ceiling.
For the CAEB, this is a fact that clearly and explicitly puts on the table that the problem facing the archipelago is not of external origin: the new historical peaks recorded in terms of number of visitors, tourist spending and occupancy during the month of July confirm the strength of demand – but internally and, more specifically, the structural difficulties that the region presents in taking advantage of the accumulation efforts and volumes of activity.
At European and global levels, the beginning of the de-escalation of interest rates is confirmed. At its last meeting on September 12, the European Central Bank confirmed the change in the monetary policy cycle that began in mid-June, approving a further decrease in the price of money by 25 basis points and leaving it at 3.5%.
With this move, he shows his confidence that the process of controlling inflation is progressing at a good pace and suggests that the time has come to support economic activity.
In the international context, the main aspect that remains worrying is a difficult geopolitical scenario with different active armed conflicts.
