The Chamber of Commerce of Santa Cruz de Tenerife forecasts that the Canary Islands economy could grow by around 3% in 2023, provided that tourism responds as it has done so far, although this growth will be significantly lower than last year, but also above the increase expected for the Spanish economy as a whole.
According to the Canary Islands Economic Situation Bulletin corresponding to the fourth quarter of 2022, the Canary Islands economy maintained its dynamism during the fourth quarter of last year, mainly due to the good results obtained by the tourism sector and the good performance of employment during the year as a whole. Thus, 2022 closed with a growth rate of 8.2% in its first estimates by the ISTAC (2.7 points higher than the national rate, which stands at 5.5%), although the Chamber of Commerce predicts that this growth could be even higher, standing at around 9%.
Thus, for the second consecutive year, the Canary Islands recorded growth in its Gross Domestic Product (GDP), which has allowed it to recover much of the wealth lost in 2020 as a result of the pandemic (the fall in GDP was 19.1%), without yet reaching the levels of 2019.
The main concern for the chamber of commerce is the impact of the rise in interest rates on the economy, a rise that has not yet ended under pressure from inflation, the intensity and duration of which is still difficult to determine. If we add to this the effects of a runaway core inflation, which will take longer to counteract, everything suggests that the second half of the year will be more difficult for families and companies.
Faced with this scenario of greater difficulty for the private sector, due to the expected moderation in consumption which will lead to a slowdown in activity and employment, the Chamber of Commerce believes that this would be the right time to undertake public investment projects to offset the expected stagnation of private investment.
However, despite having the largest budget in the history of the Canary Islands, the Chamber of Commerce estimates that public activity will slow down in the second half of the year until the newly elected teams take office and take charge of the projects, if they do not consider it appropriate to suspend or redirect them, delaying their implementation and, therefore, the ability of the public sector to boost the economy during the current year.
MAINTAINING AIR CONNECTIVITY IN THE CANARY ISLANDS
In addition to the increased vulnerability of families and companies due to the impact of inflation and the paralysis that may occur in the public sector because it is an election year, this year it will also be crucial to maintain competitive connectivity conditions.
In this sense, there is a concern about two very important issues for the airline industry. On the one hand, the repercussions that the purchase of AirEuropa by Iberia could have, as this could lead to a loss of frequencies and an increase in prices, and on the other hand, the decision that will finally be taken in Europe on the exemption of paraffin tax for flights between the Canary Islands and the rest of the countries, which, for the moment, has only been approved until 2030 for air traffic with the mainland and between the islands.
Another of the “bottlenecks” for recovery will be the lack of personnel to fill these posts, as labour will continue to be in demand in traditional activities such as construction and the hotel and catering industry, as well as in emerging activities such as those related to the development of the energy sector or the audiovisual sector, among others.
In this regard, the Chamber highlights the importance of accelerating the implementation of the Canary Islands Strategy for Dual Vocational Training, which could adapt the professional skills acquired through vocational training to the requirements of the reality of companies, promoting quality employment and boosting the economic and competitive development of the Canary Islands business fabric.
This is a field in which the Chambers of Commerce, as intermediary bodies, are already working through information and individualised advice to companies, detection of needs, intermediation between employers and educational centres and training for company tutors.
Finally, the Chamber highlights the need to maintain the production sector, as well as helping it to resize itself in order to achieve stronger and more competitive companies in all branches of activity. Thus, December 2022 ended with a total of 60,989 companies registered with Social Security with dependent workers, 905 more than at the end of 2021, but 958 fewer than in December 2019.
A deterioration that may worsen in the current inflationary scenario of high costs and reduced business margins in a horizon marked by a foreseeable decline in demand due to the consequences of the monetary policy decisions that are currently being adopted.
In this sense, the Chamber’s management warns that it is necessary to keep companies viable with measures that help them to overcome the inflationary situation, as well as helping them to become more ambitious in their investment, expansion and hiring capacity.