The Balearic economy closed the 2025 financial year with annual growth of 3.3%, four tenths of a percentage point lower than the previous year, and has confirmed signs of ‘exhaustion’ in the volume-based growth pattern. This is the main conclusion drawn from the “Economic Evolution” report published on Monday by the Confederation of Business Associations of the Balearic Islands (CAEB).
The fourth quarter of 2025 closed with growth of 2.9%, representing a slowdown of three-tenths of a percentage point compared to the previous period due to an “worse-than-expected” October in the tourism sector. Consequently, the annual growth rate for the Balearic economy stands at 3.3%, down from the 3.7% recorded in 2024.
This year-on-year decline, the employers’ association stated in a press release, is due to the economy “running out of steam” as the year progressed, confirming signs of “exhaustion” in the volume-based growth pattern. Even so, the Balearic economy remained above the annual average growth rate for Spain (2.8%) and the European Union (1.4%), the latter being affected by the weakness of Germany (0.4%) and Italy (0.8%) and, to a lesser extent, by a French economy that is clearly accelerating (1.2%).
Three out of five European economies saw their growth slow from October to December, such as Poland (3.6% compared to 4%), Ireland (3% compared to 11.1%) and Sweden (2% compared to 2.57%). By island, Mallorca remained the main driver of the Balearic economy throughout the year (3.3%), although it lost momentum in the final quarter compared to the previous one (2.9% compared to 3.3%).
Ibiza and Formentera ended the year at 3%, remaining at the same levels as in the third quarter, whilst Menorca recorded a growth rate of 2.7% after slowing by one-tenth of a percentage point from October to December. The slowdown in economic activity, according to the CAEB report, did not affect job creation, which remained robust from October to December (3.4%), above the national average (2.5%).
The 523,304 workers registered with Social Security at the end of December represent a new record in the historical series. Unemployment thus fell to 5.3% of the labour force, once again below the national average (10%). Inflation fell by one-tenth of a percentage point during the fourth quarter of 2025 (3.2%) as a result of the rise in energy prices (5.3%) and moderation in services (3.9%).
The Balearics ended December with 2.9% inflation, falling to 2.2% in February 2026.
However, the conflict in the Middle East has reignited the possibility of a new surge, as has already occurred at national level (2.3% in February and an estimated 3.3% in March) and across Europe.
Since the US and Israeli attack on Iran on 28 February, the association has highlighted, gas and oil prices have already risen by 70% and 60%, respectively.
From a supply perspective, the fourth quarter saw a slowdown in the growth rate of services to 2.9%, which closed 2025 with growth of 3.3%. Industry suffered a slight decline to 1.4%, whilst construction was the most dynamic sector from October to December, at 4.2%. On the demand side, private consumption saw its growth moderate in the final quarter of 2025 (3%). The retail trade index grew at a slower pace (2.9%) than in the previous quarter (6.1%), food distribution turnover moderated (0.6%) and the production of consumer goods even declined (-1.5%). Similarly, non-resident spending also lost momentum during the fourth quarter, falling from 5.5% to 0.2%.
In contrast, investment once again emerged as the most dynamic component, strengthening its growth rate in the last three months of the year (4.1% compared to 3.8%), in line with the strong performance of the construction sector. Finally, external demand reduced its positive contribution as a result of the moderation in the rise in tourism service exports to 0.2%.
The year 2026, the CAEB has noted, has begun with a “new twist” in the international geopolitical landscape caused by tensions in Venezuela and Greenland and, in particular, the intensification of the conflict in the Middle East, which have “once again sent global uncertainty soaring”. In the short term, the main source of risk lies in the impact that the current surge in energy prices may have on inflation. In the medium and long term, there are concerns about the effects this renewed surge in uncertainty may have on economic activity.
The latest forecasts published by the International Monetary Fund (IMF) were already pointing, prior to the recent geopolitical escalation, towards a scenario of moderate growth for the global economy.
Against this backdrop, according to the report, the Balearics face the new financial year with the need to accelerate a growth strategy based on making better use of available resources and generating greater added value.
In a world marked by strategic fragmentation, energy volatility and growing pressure on resources, the question is no longer simply “how much a region can grow”, but “to what extent it is capable of continuing to generate prosperity, cohesion and well-being on a sustainable basis”. It is here, according to the president of the association, Carmen Planes, that the region “must commit to building a more robust, productive economy that is prepared to sustain its position on the global stage”.