Canary Islands

• The Canary Islands have 2.24 million inhabitants, 4.6% of the total population, making it the seventh most highly populated region in Spain. It is one of the autonomous communities that has seen the strongest population growth over the last two decades and it is among the youngest regions: only 17.9% of the population is over the age of 65 (20.4% on average).
• The GDP of the Canary Islands (49.021 billion euros) accounts for 3.6% of Spanish GDP, the eighth highest of all regions.
• GDP per capita (22,303 euros) is the third lowest in the country and 20.8% below the national average. The region has been falling further behind the average, due to strong population growth coupled with a less buoyant economy.
• The Canary Islands’ sectoral composition is highly dependent on the tourism sector, which is reflected in the importance of trade, transportation, hotels and restaurants, and leisure (37.8% of GDP vs. 28.4% in Spain); the public sector also plays a key role (21.7% vs. 17.8%). However, the manufacturing industry is of far lesser importance (3.0% vs. 12.5%).
• Reflecting the less prominent role played by industry, exports of goods account for a very small proportion of GDP (6.7%, the lowest of all regions); more than 55% are energy products – fuel for aircraft and ships. Exports of tourism services are particularly important for the Canary Islands: in 2023, foreign tourists spent over 20.300 billion euros in the region, 19% of their total spending throughout Spain, and tourism’s direct and indirect contribution to the Canary Islands’ GDP stands at around 35%.

Given its sectoral composition, the Canary Island’s economy was among those that benefited most from the lifting of restrictions after the pandemic. At CaixaBank Research, we forecast 3.5% GDP growth in 2023 (2.5% in Spain), the second highest in the country, a return to 2019 levels. The upturn in tourism boosted job creation and consumer spending.

For 2024, our forecasts indicate that GDP growth will slow down to 2.5%, but will remain above the average (1.9%). Tourism will continue to be the main driver; moreover, armed conflicts such as that in the Middle East may make the Canary Islands a more attractive destination than other competitors. We also expect the disbursement of European funds to gather pace, with the Canary Islands being one of the biggest beneficiaries of these funds.

The Canary Islands’ labour market is among the best-performing in the country, with average growth in the number of registered workers affiliated to Social Security standing at 4.3% in 2023 (2.7% on average in Spain) and up by 4.2% year-on-year in January this year (vs. 2.6%), thanks to jobs created in administrative sectors, healthcare and, above all, hotels and restaurants. Consequently, employment is 12.4% higher than it was in January 2019 (vs. 9.5%). The unemployment rate, among the highest in Spain, stood at 16.2% in Q4 2023 (vs. 11.8%), although this is an improvement on the pre-pandemic figures (18.8% in Q4 2019).

Following the shock caused by the pandemic, tourism is recovering strongly, especially in terms of foreign tourist arrivals and spending, which in 2023 far exceeded the 2019 levels, by 6.1% and 20.6%, respectively (1.9% and 18.2% in Spain). However, total overnight stays (domestic and foreign tourists) in tourist accommodation are lagging somewhat behind and are 0.6% below pre-pandemic figures (vs. +2.1%).

The recovery of tourism and strong performance of employment have had a positive impact on consumption, allowing it to withstand the price pressures. Thus, the volume of retail trade grew by 8.9% in 2023, higher growth than in Spain as a whole (7.5%), so it is now 1.2% higher than it was in 2019 (vs. +3.0%).

As regards the Canary Islands’ industrial sector, this remains extremely buoyant, above average for the country, although it accounts for a very small proportion of its productive sector. Following the previous year’s strong figures, industrial production gained momentum in 2023, with an increase of 5.6%, the highest of all regions (vs. –0.8% in Spain) and 1.5% higher than in 2019 (vs. –1.2%).