Canary Islands Economy Set for 3.5% Growth in 2023 Amidst Challenges

The Canary Islands are poised for a notable economic uplift, with forecasts indicating a Gross Domestic Product (GDP) growth of 3.5% by the close of 2023. This projection reflects a positive outlook for the archipelago, which has long relied on tourism and internal consumption as key economic drivers.

Key Factors Behind Economic Expansion

This encouraging forecast is detailed in the Economic Situation Bulletin for the third quarter, a collaborative effort between the Santa Cruz de Tenerife Chamber of Commerce and CaixaBank. The report was presented at a press conference featuring prominent figures such as Santiago Sesé, President of the Chamber, Manuel Afonso, Territorial Director of CaixaBank, and Lola Pérez, General Director of the Chamber.

According to the findings, the anticipated economic growth is largely attributed to two pivotal factors: a significant rise in internal demand and a thriving tourism sector. The Canary Islands have experienced an uptick in both population and employment rates, which has led to increased consumer spending. Furthermore, the tourism industry has reached remarkable heights, with record numbers of visitors and substantial tourist expenditure contributing to the local economy.

Potential Obstacles to Sustained Growth

Despite the optimistic growth projections, there are underlying concerns regarding the sustainability of this economic momentum. The pace of growth is reportedly slowing, primarily due to rising prices that have begun to affect household consumption, particularly in essential areas such as housing and basic goods. As of the end of September, the inflation rate in the Canary Islands was recorded at 2.2%, presenting challenges for consumers who are feeling the pinch of increased living costs.

In addition to inflationary pressures, legal uncertainties and bureaucratic obstacles have emerged as significant barriers to economic activity. These issues have fostered a climate of mistrust among investors, a sentiment that is increasingly prevalent across the European Union. Furthermore, ongoing international uncertainties, including the conflict in Ukraine and trade tensions, coupled with an economic slowdown in major EU economies such as France, Germany, and Italy, could pose risks to the tourism sector, which is vital for the islands’ economy.

Infrastructure and Budgeting Concerns

Santiago Sesé has voiced concerns regarding the recent increase in airport charges implemented by Aena, arguing that such hikes are unwarranted given the record revenues and profits reported by the airport management. He emphasized the critical need for investments to address the islands’ infrastructure requirements, which are essential for supporting continued economic growth.

Moreover, Sesé criticized the absence of a General State Budget (PGE), labeling it as a significant impediment to effective planning and operational execution. He pointed out that the European Commission’s diminishing influence compared to the European Council raises concerns about the management of funds, which will now be allocated by states rather than regions, further complicating the economic landscape.

Additionally, there is a call for the Canary Islands to gain greater autonomy in utilizing its financial surplus, as it is currently the region with the least debt in Spain. Lola Pérez highlighted that while all productive sectors are experiencing growth, the industrial sector is lagging behind. She noted that while construction is thriving, commerce is growing at a more modest pace of 4.2%.

As of the end of the third quarter, the number of social security affiliates in the Canary Islands has exceeded one million, and the unemployment rate has decreased to 14.2%. The tourism sector remains robust, with accumulated spending increasing by 8.9% this year, although some businesses in commerce and hospitality continue to face challenges.

Key points

• The Canary Islands are projected to achieve a 3.5% GDP growth by the end of 2023.
• Key growth drivers include increased internal demand and a booming tourism sector.
• Inflation in the region is currently at 2.2%, affecting household consumption.
• Legal and bureaucratic challenges are hindering investment and economic activity.
• Concerns have been raised over rising airport charges and the absence of a General State Budget.
• The unemployment rate in the Canary Islands has dropped to 14.2%.
• Tourism spending has increased by 8.9% this year, despite challenges in some sectors.