The duality of the Balearic Islands: record number of tourists, but lagging behind in research and development

PalmAlthough the Balearic Islands managed to welcome 18.7 million tourists in 2024—4.9% more than the previous year and a new all-time high—they remain at the bottom of the list in terms of investment in research and development (R&D), with only 0.48% of their GDP allocated to this area in 2020. There are only 3.4 researchers per 1,000 inhabitants in the Balearic Islands. This paradox highlights one of the territory's major challenges: sustaining tourism-led economic growth while maintaining a low commitment to innovation and knowledge, key to long-term development.

This reality is evident in the annual report of the Economic and Social Council (ESC) for 2024, presented by its Secretary General, Antoni Alcover, and its President, Francesc Fiol. Despite global challenges—such as trade tensions with China, the war in Ukraine, and the US elections—the Balearic Islands have demonstrated a resilient economy, with Gross Value Added (GDP) growing by 4%, a rise higher than the national average. Per capita GDP also improved (+10.9%), reaching €34,381.

From a territorial perspective, Mallorca continues to lead the way in economic activity. Compared to 2014, the Gross Added Value (GAV) of the Pitiusas grew by 37.1%, while in Mallorca it increased by 27.2%, in Menorca by 24.7%, and the Balearic average stood at 28.3%. However, if we look at the variation compared to 2023, Mallorca leads the way with 4.4%, followed by Ibiza (3.3%) and Menorca (1.5%).

Booming tourism economy

The services sector, the main economic driver of the Islands, has experienced a notable expansion of 6.9 percent, driven by the arrival of tourists (+4.9 percent). In addition to the increase in visitors, tourism spending has increased by 12 percent, exceeding €22 billion. Eighty-two percent of tourists are foreigners, and their average stay is five days. Furthermore, a trend toward longer seasons has been consolidated thanks to the increase in tourism during the low season. The average hotel rate is the highest in Spain (€146 per day), and each visitor spends an average of €187 per day. Most tourists stay in hotels (86 percent), followed by tourist apartments (12 percent) and rural accommodation (2 percent), with a total of 120 million overnight stays recorded this year (+7.1 percent), although the average stay decreased by 2.8 percent. Hotel prices have risen by 7.3% in one year and by 41.3% since 2019.

However, this economic and tourism growth coexists with serious structural problems, such as the housing crisis. According to the CES (Central Spanish Economic Commission), residents of the Balearic Islands need 60.8 years to acquire a home if they allocate 30% of their salary—double the Spanish average. Furthermore, 26% of home purchases were made by foreigners, well above the national average of 7.8%. Rental prices also register the highest figures in Spain, with an annual increase of 3.2% and 23.9% since 2015. Today, 30% of the population lives in rented accommodation, the highest percentage of all the autonomous communities.

Regarding the different economic sectors, the evolution is uneven. Industry regained momentum, with a 6% increase in the production index (from 100 to 106), while construction grew by 3%. The services sector is committed to diversifying toward higher value-added activities in areas such as communications, information, and transportation. The primary sector also shows an improvement, visible, for example, in the 40% increase in the number of workers, although it only represents 0.7% of total employment.

The labor engine is on the move

The labor market is also breaking records, with a 3% increase in the number of workers and a doubling of business creation compared to the previous year. The Balearic Islands are the autonomous community with the third highest number of permanent contracts (85.5%), and the total number of civil servants has decreased by 3.4%.

The population of the Islands continues to grow and now reaches 1,231,768 inhabitants, an increase of 21,682 people in one year (+1.8%). Of this total, 27.7% were born abroad. The largest age group is between 16 and 64 years old (68.7%), while 14.6% are under 16 years old and 16.7% are over 65 years old. This means that there is now more elderly population than children. The decline in the birth rate is accentuated: in 2023, only 8,768 births were registered, well below the 11,918 in 2007, when the economy was at its peak and the real estate sector was booming.

Committed Sustainability

The Balearic Islands Sustainability Indicator (SMI), which assesses the archipelago's environmental performance based on six dimensions and 23 indicators, has fluctuated significantly since 2019. On a scale of 0 to 100, the initial score for the islands as a whole stood at 44.9 points. Menorca led the way with 49.1 points, while Ibiza trailed with just 35.3.

In 2020, coinciding with the pandemic and restrictions on economic activity, the SMI rose to 56.5 points. This increase was attributed to the drop in energy consumption, the reduction in waste generation, and the decrease in polluting emissions. However, with the resumption of economic activity, the indicators declined. In 2022, the index had fallen to 43.6 points, even below the level recorded in 2019.

By island, Menorca has maintained the highest scores throughout the period, with records ranging from 43.5 to 58.9 points. Formentera and Mallorca trail behind, while Ibiza consistently presents the lowest results, between 36.7 and 46.1 points. In 2023 and 2024, they have shown some improvement in areas such as land and waste management. However, indicators related to drought and other climatic phenomena have worsened.

The water situation in the Balearic Islands remains critical. The archipelago is characterized by the absence of permanent rivers and reservoirs, which forces water demand to be met primarily with groundwater. The variability of rainfall and increased consumption have caused significant pressures. In June 2023, water reserves stood at a worrying 45%, the lowest level in the last five years. By island, Mallorca recorded 44%, Menorca 56%, Ibiza 38%, and Formentera 42%.

Given this situation, desalination plants have become a key infrastructure, especially in areas with the greatest tourist pressure. In Mallorca, desalination covers 30% of urban consumption; in Ibiza, it reaches 70%, and in Formentera, it represents virtually the only source of urban water. Although they offer a stable supply, these facilities entail high energy costs.