The latest economic report from the Confederation of Balearic Business Associations (CAEB) points to an "historical and unprecedented contraction of 35.6% of Balearic GDP". Second quarter data amplify those of the first quarter, when the shock of Covid and the restrictions in March had an effect on demand "almost immediately". The shock to the Balearic economy has had a "devastating impact, which has led to an unprecedented recession".
This situation, the CAEB warns, "compromises the viability of many businesses and heralds an increase in bankruptcies, especially in transport, retail, tourism, accommodation, restaurants, nightlife, culture and entertainment". The report states that "no economy on the planet has managed to escape the recession", but the Balearics have been "particularly damaged" because of tourism specialisation and the "severity" of the restrictions. "The more or less generalised restrictions which prevailed between April and most of June have led, together with the prevailing uncertainty, to historical regression in all supply components, without exception."
The CAEB focuses on the tourism value chain having been "completely truncated". This was not just because of the closure of borders but also because of a general fragmentation. The paralysis of one link in the chain has brought a halt in all regional production and therefore made a rapid recovery difficult.
The turnover index per sector shows a 98.1% decrease in passenger air travel and a 55.5% decrease in the services sector, with the loss of employment at 14.6%. Industry is moving into negative territory owing to a "blockade of international trade", while construction isn't avoiding recession either.
All the islands, the report notes, have suffered productive paralysis. Ibiza and Formentera have been challenged more than Minorca, with employment loss having been 22% compared with 14.5% in Minorca, especially in the tourism sector. Minorca's industry has been more affected than in Ibiza.
With regard to ERTE, the confederation's view is that the positive effects will mostly be felt by employees with permanent contracts but that these will be diluted over time as the economic shock lengthens. The CAEB is not optimistic about the future, predicting that the shock "will be more persistent than expected" because of uncertainty, the fear of an uncontrolled spread of the virus, which will force new restrictions on business activity, and the erosion of public finance.
The CAEB forecast is for unemployment to rise significantly above 20% because of the destruction of part of the islands' productive fabric. The confederation's president, Carmen Planas, is therefore demanding "sanitary rigour", as controlling the pandemic is an "absolute priority". "But we also urgently need to launch plans for sectors that are effective for reactivating the economy and which will act as a catalyst for boosting demand."
Planas insists that the Spanish government should reciprocate "the always generous Balearic Islands*" when it comes to the distribution of the 140,000 million euros of European funds. All administrations, she argues, need to be responsible partners in the current situation, declining to raise taxes and understanding that the "existing tax burden is drowning us all, especially small to medium-sized businesses and the self-employed".
"We would demonstrate that we have the intelligence that the current situation requires if, in parallel, we were able to take advantage of the time by implementing training plans to allow workers to specialise, so that when the engines are running again, we are prepared to take off. Everyone should work in the same direction and with the same objectives, both public and private sectors."
* By generous, she was referring, for example, to the Balearic contribution to national coffers and so therefore to the regional financing system.