The Balearic Islands’ economy contracted by 30.1% in the third quarter, according to the ‘Economic Evolution’ report by the Confederation of Business Associations of the Balearic Islands (CAEB).
The CAEB study, which was published this Thursday, confirms that the transition of the Balearic economy towards the ‘new normal’ “is being slower than expected, given the very serious loss of tourist activity that the archipelago has suffered”during the central months of the high season.
In this way, the president of CAEB, Carmen Planas, has pointed out that “the data in this report on the economic situation for the third quarter and those that we are already learning about the fourth point to the evolution of the Balearic economy ends 2020 with a contraction close to 25% and a decline that would double that of the national average “.
According to a press release, from the point of view of supply, the report highlights the services sector has suffered a decline of 33.2%, compared to 37.8% in the second quarter.
All indicators confirm “the strong blow” that the pandemic has exerted on tourism since, according to CAEB, they have fallen from the turnover index (-43.1%) to the affiliation (-15.2%), in a context in which the contraction of the tourist influx (-74.3 %) has meant, in absolute terms, the loss of more than six million tourists compared to the same period of the previous year.
Regarding the industrial sector, the recessionary scenario and the increase in uncertainty in the markets have conditioned the evolution of the main indicators throughout the third quarter. This is the case of the industrial production index (-21.1%), of affiliation (-4.6%) or of energy demand by the sector (-16.5%).
A dynamic that, as a whole, explains why the sector has experienced a contraction of more than two digits for the second consecutive quarter, specifically 14.7%, despite the reduction in restrictions.
The Marker of growth in the Balearic construction sector ended the third quarter with a 9.2% contraction, clearly lower than the previous quarter (-20.9%) and to that experienced by its national counterpart (-11% vs -27.5%, 2nd quarter).
CAEB has indicated that this better behavior it is due to pre-covid projects. Thus, they experienced work visas in the third quarter of 2019 (8.9%) and whose execution period extends to an average of four quarters seen.
From a demand point of view, the growth rate of consumption has contracted by 31.3%, a rate that, despite the positive effect derived from the initial relaxation of restrictive measures, greater freedom of movement and the decrease in consumer prices (-0.6%), has been adversely affected by the labor bill (- 13%) and the associated effects on the consumption pattern of both residents and non-residents.
Not surprisingly, retail sales have fallen (-15.9%), in a context in which non-resident spending has fallen by four thirds (-82.4%).
On the other hand, investment has suffered a contraction of 17.6%, as a result of “the high uncertainty and the decline in business expectations”. And the fact is that business confidence has fallen again (-29.9%), as has the number of affiliated companies (-10.1%) and the demand for capital goods (-62.2%).
Likewise, investment in construction has ended the third quarter with a further reduction in project budgets for work permits (-21%).
FIGURES BY ISLANDS
The CAEB study indicates that the greater orientation of the productive structure of Ibiza and Formentera towards services explains that the negative growth differential has widened, again, in front of the rest of the islands. And the fact is that the GDP of Les PitiÃŒses has fallen by 34%, clearly above that of Mallorca (-29.5%), and Menorca (-29.2%).
This situation can be observed in the labor sphere, where the PitiÃŒses have destroyed employment (-21.1%) to a greater extent than Mallorca (-11.5%) and Menorca (-13%).
And it is that on the supply side, the services sector, and more specifically the branches most linked to the Pitiuso tourism sector, have experienced the greatest contraction of affiliation in the archipelago (-30.9% vs -25 , 2%, Menorca).
Conversely, the construction sector in les PitiÃŒses has shown a better performance compared to Menorca, both in terms of affiliation (5.2% vs 1%, Menorca), and in the unloading of solid bulk goods (-18.8% vs -31.7%, Menorca). On the other hand, in the industrial sector they have shown very similar behavior, as indicated by the decline in electricity demand (-24.3% vs -24.5%, Menorca).
On the demand side, Pitiuso consumption has added to the effects derived from growing uncertainty, the impact that the increase in registered unemployment has on the expectations of families (144.5% vs 97%, Menorca). Circumstances that have also hampered investment, as corroborated by the reduction in the number of affiliated companies (-13.4% vs -10.2%, Menorca).
Given these data, from CAEB have highlighted that the months of January and March will be decisive for 2021, since the evolution of the outbreaks, the tourist reopening of the archipelago and the catalytic role of the vaccine will determine the rhythm of the recovery.
With everything, CAEB has considered it “essential” to carry out a strategic approach to reopening tourism that allows the prevalence period to be successfully passed through with a comprehensive, simultaneous and harmonized action on four axes: territory, mobility and borders, facilities and services and activities at destination.
In this sense, Planas stressed that “looking to next year, it is absolutely necessary for the Balearic Islands to be effective in solving three major challenges: controlling the pandemic, reopening our tourism activity and attracting European funds”.
For the president of CAEB, “These three challenges: health, tourism and financing, will undoubtedly mark an uncertain 2021 in which the key will be public-private collaboration to give security to companies and workers”.