Hospitality Sector will be the worst affected by the coronavirus crisis.

Hospitality Sector will be the worst affected by the coronavirus crisis.

30-03-2020Jaume Morey

The coronavirus crisis will cost the Balearic economy more than 3,200 million euros according to a report by Carles Manera, President of the Balearic Consell Econòmic i Social, or CES.

The study contemplates three possible scenarios, depending on the period of impact of the State of Emergency, ranging from optimistic to negative between May 31 and June 30.

The fall in Gross Domestic Product, or GDP, this year would be between -5.8% and -11%, which translates into an economic loss ranging from 1,702.8 to 3,231.1 million euros.

Under the most pessimistic scenario, the dip in the Balearic economy would be three times more than it was in 2009 when it reached 3.9%.

"This reduction in GDP is unprecedented in the recent history of the Islands," warns the CES.

Uncertainty

The study states that “the current situation in the Balearic Islands represents a structural change that breaks all assumptions and hinders future estimates," saying, "there is uncertainty related to the duration of this new status."

It also confirms that the speed and scope of the consequences of the crisis "are exceptional" and points to some of the "immediate effects", such as the temporary fall in production, the contraction of internal and external demand, the reduction in disposable income of households and general mistrust.

Of the three scenarios, the Hospitality Sector will be the worst hit.

Taking June 30 as the date of normalisation, the fall in activity could reach 90% in April.

The Hospitality Industry is practically paralysed and only establishments that serve food prepared at home can remain open.

Commerce and Transport will also be badly affected and could see a decrease in activity of 70%.

Measures

The report highlights the difficulty in making medium and long-term predictions and the uncertainty surrounding the current situation, but acknowledges that it is probably temporary.

"Without the expansion of the announced measures, the risk of entering a severe recession is very evident and without the support and coordinated action of the European Union, it will be very difficult to resolve the crisis,” said Manera.

He also said we must wait and see how things develop and make sure that the temporary employment regulation files, or ERTE do not become ERE, which is entirely dependent on what the future holds, especially in the Tourism Sector.

According to a study by the Fundació Impulsa "the cessation of activity over the last fifteen days has caused a direct negative impact of 0.4% of Balearic GDP, or 120.55 million euros,” most of which will be irrecoverable in the course of the financial year given the depth of interruption in the field of services.

“In the Economic sphere, the measures adopted must minimise the risk of permanent damage to the productive fabric,” said Fundació Impulsa’s Technical Director, Antoni Riera. “The activity restrictions cause a significant mismatch between companies' invoicing and their labor, financial and tax obligations, which creates short-term tensions and compromises the response in the medium and long term.”

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Nick / Hace 7 months

Mallorca has put taxes up to slow down tourism with a tourist tax and last year groups were putting putting up slogans " GO HOME TOURISTS" Well, you have got what you asked for. Karma.

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Bert / Hace 7 months

Dave, unfortunately I would tend to agree with your guesstimation more than Sr Manera’s, who has been proven to be wrong on previous occasions, like most “experts”. I can’t see what Brexit has got to do with it though, and please suggest some ideas you may have about diversifying sources of income, when its a well known fact that the Balearic population has Spain’s lowest level of education, and for that matter, one of Europe’s as well.

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Dave G / Hace 7 months

I think even the worst case scenario is underplayed at -11%. This assumes normalisation at June 30. That assumes tourists come here as normal. They aren't and won't. It was already going to becbad with Thomas Cook gone and Brexit. Now airlines are grounded, tourists are skint and fearful of travelling on flying incubators. The UK Govt has allowed workers to defer annual leave for 2 years and ghat is what tgey are doing. Airlines will keep their planes grounded as long as the Govt pays 80% of their wages. Even after that I suspect flights will be cut in their droves, especially non business flights ( like Mallorca). I estimate GDP will be down 20% and 30% of all bars & restaurants will close. Its very sad, but Mallorca must diversify its sources of income as this can happen again.

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