Another 12 months of economic problems

PALMA
THERE was good and bad news from the Majorcan Chamber of Commerce yesterday which predicts that the Balearic economy is going to recover, but not for another year.

The business body's Director of Research, Catalina Barcelo, told local business leaders and politicians yesterday that the economy is not forecast to pick up until September or October of next year and there are three possible forms in which the economy will recover.

She explained that her research team has been using three variables to try and predict how the economy will respond and the eventual economic turn around is expected to be “moderate.” However, the President of the Chamber of Commerce, Joan Gaul, admitted that the economic down turn has been “faster and more acute” than expected.
He said that economic growth in the second quarter of the year was just 1.5 percent and next year's growth forecast has been readjusted to 1.2 percent.

But, Gual told the business community that the Balearic economy has a very powerful weapon to combat the recession: tourism.
He said that the tourist industry will help speed up the local economy's revival once it bottoms out and the situation improves at the tail end of next summer.

Gual explained that, the global tourism industry is expected to move 10'000 million people in 2010 and that the Balearics will get its fair share of the market and the service sector continues to be the pillar of the local economy - despite a slight fall in business this year.

The Chamber of Commerce boss confirmed that the construction industry has indeed suffered a sharp decline in activity although it has posted growth of 0.4 percent so far this year.

But, between January and May, the area of land being built on fell by 44.8 percent and number of properties sold dropped by 25.3 percent.
Gual said that it is the highly volatile market, caused by the doubling of fuel prices over the past year, which has caused the recession and driven down consumer confidence on the high street and in the business community.

Add to that the fact that inflation is running at 2.3 point higher than this time last year and it is clear why the economic turn around is going to take another 12 months to materialise.