The Balearic economy may be set for a further downturn this year, but the rate of inflation is not and the Balearic government has expressed its concerns about the runaway cost of living. Regional finance minister, Joan Mesquida, yesterday presented the financial outlook for 2002. The rate of inflation in the Balearics last year was 3.7 per cent, higher than the national consumer price index of 2.9 per cent and this year Mesquida said that the regional rate of inflation will be 3.3 per cent, well up on an expected two per cent rate of inflation in Spain. The minister said that the gross national product will be 2.4 per cent higher than last year, which witnessed growth of 3.2 per cent, and nearly double the euro zone's 1.4 per cent. All industrial and commercial sectors can expect to see a slow down in activity this year. Activity in the service sector rose by three per cent in 2001, but this year, the rate of growth will be around 2.2 per cent. The projected growth for the industrial sector is 2.1 per cent, compared to 2.5 per cent last year while the construction industry, which enjoyed a 6.8 per cent increase in activity last year will this year have to be content with 4.4 per cent. The only sector which will enjoy a bigger rise in activity than last year is the primary sector, agriculture, with the Blue Tongue virus and mad cow scares over and consumer confidence having returned to normal. The improvement in consumer confidence, the Balearic government believes, will continue to strengthen. Consumer spending rose by 1.2 per cent last year and over the course of this year, Mesquida said that consumer spending will rise by three per cent. The Minister said that obviously the Balearic economy is very dependent on economic performance in the United Kingdom and Germany, and to a lesser extent conflicts in the Middle East, but the minister is confident that in both the UK and Germany, the economic situation will improve. Majorca is where prices rose the most over the past year. The island's rate of inflation last year was 3.3 per cent, compared to 3.2 in Minorca and 2.9 in Ibiza and one of the most common complaints from tourists about Majorca now is that it has become too expensive, especially in comparison to other destinations, including the mainland.

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