SLIGHT GROWTH IN BALEARIC ECONOMY

Staff reporter ANTONI Riera, the director of the bank “Sa Nostra's” Economic Research Centre, reported yesterday that the Balearic economy is showing signs of “a slight improvement” during 2003. Performance this year is over and above the growth of 0.6 percent that was declared for 2002. The Centre is promoted by the Sa Nostra savings bank and the Balearic University (UIB), and during the presentation of its “Economic and Social Report on the Balearic Islands for 2002”, Riera warned that there are worrying signs for the coming year linked to problems with the key client markets of Germany and Great Britain, which could potentially become worse.Viera quoted data published two days ago by “Eurostat” which showed that the growth of the euro had dropped by 0.1 percent in the second quarter of the year, a situation which could lead to recession if it were to regress further during the next quarter. For 2003, the same sources have forecast for the single currency countries, a growth rate “on the low side” of between 0.7 and 0.4 percent. “This is not outside the realms of possibility in the Balearics, although there is room to hope that 2003 may show a slightly better performance than 2002” suggested Riera. Having been responsible for the production of the report on the state of the Balearic economy, the director was in a position to be encouraging about positive trend indicators such as an increase in the number of people arranging for new car papers to be put in order, a greater number of foreign visitors and figures reflecting the number of nights they stay on the Islands. This data qualifies as “signs that the tide is turning”. Another perspective of the same analysis suggests the construction industry is undergoing moments of “readjustment”. Although there is a drop in the number of people employed in the sector, it is balanced by a growth in the number of building projects for which official permits have been obtained. Riera also commented that the value of the Pound Sterling drawing close to that of the Euro, could before long materialize as a drop in the exchange rate of the British currency. This, combined with the uncertainty surrounding the German economy, is a factor that could prejudice developments in the Balearics in 2004. The dependency of the Balearic gross product on these two key client markets cannot be overstated. As far as the results for 2002 were concerned, Riera pointed to the fact last year in the archipelago, goods and services to a value of 17'604 million euros were produced, which amounted to an increase of 0.6 percent. The figure was below the national average (2 percent) and also below the average figure for the European Union (1 percent). He highlighted the fact that Minorca was the island that led Balearic economic activity with a growth of 1.7 percent, in contrast to Majorca's 1.2 percent and Ibiza and Formentera's 0.4 percent. Riera specifically said that the driving power for growth was private and public consumption, as was the investment in construction although he warned that the business sector should be aware that critical factors to economic growth were “short term” periods of stimulation. In the 2002 edition of the Economic and Social Report, a document that “Sa Nostra” has published for the last 35 years, it revealed that since 1968, the gross family income of the Balearics has grown from 7'159.2 euros (in values commensurate with 2002) per person per year to 13'618 euros. The growth in employment in that period has also been significant in that there has been a rise in the number of affiliations to Social Security, from 208'800 to 378'400. This is an overall growth of 81.3 percent, noticeably higher than the Spanish figure of 34.8 percent. The study also takes into account the changes produced in the social composition of the Islands, between those that highlight the presence of the foreign population, some 14.4 percent of the total number of residents.