Article published by José Alberto León Alonso in the May 2018 issue of La Gaveta Económica.
The Canary Islands economy grew by 2.9% during 2017, one tenth less than the national average (3.0%), according to the Regional Accounting of Spain, published annually by the INE. This is the fourth consecutive year that the Canary Islands economy has grown less than the national one, a streak that coincides with the end of the economic recession in 2014.
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Of the 17 years from 2001 to 2017, GDP growth in the Canary Islands has been higher than the national average on only five occasions, in one similar case and lower than the national average in eleven years. There are also very clear phases observed: from 2004 to 2009, the GDP growth of the Canary Islands is always lower than the national one; From 2010 to 2013, the Canary Islands grew above average; and from 2014 to 2017, the economic growth of the Canary Islands is once again below the national average. The periods of lower growth than the average correspond to expansionary stages of the economic cycle, while the period in which the Canary Islands grew more than the national average corresponds to the recovery and subsequent relapse after the Great Recession of 2009.
And the final result could be even worse since the first estimates of the INE on GDP in the Canary Islands during recent years have given the Canary Islands a growth above the average, which in subsequent reviews was corrected downward to end up with economic results below the average. In recent years, the first estimates of GDP growth provided by the INE for the Canary Islands economy have been inflated, and the same is not true of the national estimates.
Thus, in March 2017, the first estimate of GDP growth in the Canary Islands during 2016 provided by the INE was 3.5%, which was corrected downwards to 3.0% last December. Likewise, in March 2016 the first estimate of GDP growth in the Canary Islands during 2015 was 2.8%, which was later corrected downward to 2.4%. Similarly, the first estimate of Canary Islands GDP growth in 2014 was 2.2%, also corrected downwards to 0.8%. In 2013, the Canary Islands GDP growth estimate was reduced from the initial -0.4% to the final -1.3%. In 2012 it went from -1.0% initially to -2.5% at the end. In 2011, from the initial 2.1% to the final -1.0%. We must go until 2010 for a GDP review to favor the Canary Islands, since the initial estimate was -0.8%, and the final estimate was 1.0%. During most of those years, the successive revisions of national growth did not exceed a few tenths in any direction.
How is it possible that if the Canary Islands are experiencing their peak tourist moment, the GDP grows less than the national average? The answer lies in productivity. If in 2000, the productivity of a worker in the Canary Islands was €52,068, 0.1% higher than the national average (€51,999), in 2017 it amounted to €52,948, almost 10% lower than the national average productivity (€58,501). It is not that national productivity has grown a lot during the last seventeen years; it is not in vain that Spain has been one of the developed countries with the lowest productivity growth. The fact is that labor productivity in the Canary Islands has not grown, not even in nominal terms, between 2000 and 2017 (less than 1.7% in seventeen years, at a rate of less than 0.1% annually). If we consider the effect of inflation, the truth is that real labor productivity has fallen so far this millennium. And we continue on the same path. In 2017, GDP in the Canary Islands grew by 2.9% and employment by 3.0%, with a drop of one tenth in apparent labor productivity.
In one of his most famous sentences, Paul Krugman, Nobel Prize winner in Economics, said in 1994 in his book “The Age of Limited Expectations” that \”productivity is not everything, but in the long term it is almost everything. A country's ability to improve its living conditions depends almost entirely on its ability to raise output per worker. Well that. We have a problem.
