Vaccines important for Mallorca tourism recovery

Tourism recovery will obviously be key to Balearic economic improvement.

19-11-2020Pilar Pellicer

A report by the BBVA bank's research unit concerning the economic situation in the Balearics predicts a 20% fall in GDP for the whole of 2020. For 2021, the report's authors - Miguel Cardoso, chief economist at BBVA Research, and David Conde, director of BBVA's eastern territory - forecast growth of 10.5%, which would be above that for Spain as a whole and higher than in other regions.

The 2020 prediction, drawing on falls of 12.1% and 23.7% in the first and second quarters, is higher than the minus 11.5% forecast for the national economy. The collapse of tourism is the principal reason, although it might be noted that the BBVA forecast of -20% doesn't match that of the Balearic government, which has been predicting -30%.

Balancing the falls in the first and second quarters, BBVA Research points to a rebound of +22.4% in the third quarter (compared with the second quarter), some six points higher than that for the whole country. A revival in tourism (limited though it was), the relaxation of mobility restrictions and increased consumer spending are said to have been contributory factors.

The report also highlights fiscal and credit boosts provided by the national and regional governments. These have helped to improve business liquidity and prevent layoffs.

Although the authors are forecasting 10.5% growth next year, they stress that this will not recover the losses incurred in 2020. The level of activity will be 11.6% below what it was at the end of 2019.

They are also cautious because of a loss of dynamism in the current quarter. Since October, there has been another decline in tourism, while there are a number of factors generating uncertainty, and this could have a negative impact on, for example, consumer spending, the import of capital goods and investment in property.

The emergence of vaccines is key to tourism recovery, and if travellers' confidence is increased, the economic scenario for the Balearics in 2021 could be more positive than predicted.

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