Brace Yourselves for the Bends Ahead
Hold on tight, there are bends ahead. The Government of the Canaries has been warning for weeks that the circumstances for 2026 “look unfavourable”, that the economic scenario appears complicated, and that the archipelago faces challenges, both nationally and internationally, that will distance it from the spectacular growth of previous years. However, the Canary Islands approach this economic cycle change from a strong starting position, with excellent figures in employment, tourism, and increased wealth, and with much of the homework already done. Therefore, a course as complex as the Monaco Grand Prix or a bend as dangerous as the Loews corner is not expected. But bends there will be, and on bends, you must always be careful: avoid the kerb, accelerate at the apex, and enter in a good position. But what are these turns that have those piloting the Canary Islands’ single-seater on alert?
The Four Key Challenges for the Archipelago
The economic slowdown, political gridlock at the national level, negotiations for the new European funding framework, and the international geopolitical context are four aspects that could mark the economic future of the archipelago in the coming year. The first point generating uncertainty is the undeniable deceleration of the economic cycle. In 2024, the Canaries led national growth in Gross Domestic Product (GDP), recorded the highest percentage increase in GDP per capita, and were the autonomous community where unemployment fell the most. The inflation rate has moderated and the positive economic outlook is noticeable in the pace of business creation and employment.
A Slowdown from Record Highs
At the same time, the archipelago has grown accustomed to record highs: in tourist numbers, sector turnover, volume of employed persons—especially among the self-employed—or the amount of public tenders. Many pre-pandemic figures have been surpassed, for example, in business creation, unemployment reduction, or consumption levels. Although it should not be forgotten that all that glitters is not gold, and the Canaries continue to drag structural problems like low wages, productivity, or high poverty levels, which show that wealth distribution mechanisms are not working as well as they should.
Even so, economic growth has been notable and unquestionable in recent years. In 2023, the Islands’ GDP increased by 4.1%. In 2024, the rise stood at 4.4%, and for 2025, it is estimated to be 2.9%. For next year, the forecast of the Government of the Canaries is that the archipelago’s economy will grow by 1.9%. So we will continue growing, yes, but at a slower pace than before. This means the rebound that occurred in the economy after COVID—following the collapse caused by the pandemic, which was even more pronounced in the Canaries—is becoming less intense.
“The bends are coming, there will be a drop in the growth rate, but not a decline,” explains economist and consulting director of Corporación 5, José Miguel González. And how will this translate into the more everyday economy? Increases in employment may continue, for example, and jobs may continue to be created, but not at the same rate. Something similar will happen with unemployment, which may even increase if more people join the labour force. “Employment has grown enormously, and we have had an unexpectedly good exit from the COVID crisis; now it is logical for it to moderate,” emphasises Professor of Economics at the University of La Laguna (ULL), José Luis Rivero Ceballos, who simultaneously clarifies that nothing suggests we are facing a new crisis “not by a long shot.”
Fiscal Policy and Political Gridlock
The scenario is not one of negative variation rates, nor a reduction in activity or massive job loss, but a slowdown of those accelerated growth rates. An economic scenario that the Government of the Canaries has already taken note of and for which it is on guard. Although to do so, it has had to abandon one of the measures that both Coalición Canaria (CC) and the Partido Popular (PP)—the groups supporting the Executive—touted as a recipe throughout the last legislature: the reduction of the IGIC (Canary Islands General Indirect Tax). And after two years of demands from opposition groups—who did not apply it when they governed—the Vice President, Manuel Domínguez, settled the matter a few weeks ago and made it clear that the promised reduction from 7% to 5% would not occur in the remaining years of the mandate because conditions are not the same and now only allow for “surgical” reductions.
A decision with which Rivero Ceballos agrees. “They should not touch it; it is a promise that is good to break,” he states. He warns that the Canaries need resources to strengthen public services, in a context where funds from the special programmes activated by the European Union (EU) after the pandemic will end. “The autonomous community’s budget must adapt to not having those extraordinary injections,” he points out. For José Miguel González, the Government should not be “just another spectator” in the face of the economic trend change. “It has to implement counter-cyclical policy and not dig in.” Therefore, given record revenue levels, it should apply “an expansive fiscal policy” to relieve, above all, those who may be more adversely affected by the new economic scenario.
The political situation at the national level is another factor generating uncertainty. With a state government lacking sufficient support in Congress, with the General State Budgets (PGE) extended since 2023, and an electoral climate that clouds all negotiations, the Government of the Canaries insists that several aspects are causing concern. “The political row in Madrid hinders the responses that the Canaries need,” states the Deputy Minister of the Presidency, Alfonso Cabello, who points especially to the lack of public accounts. The political climate, where lack of agreement and instability set the agenda, forces the archipelago to fight almost month by month for budget items that, moreover, are not updated. “The 2026 scenario is not the same as that of 2022, the items have not been scaled; just with the application of the CPI, the increase should be above 10%,” he notes.
Battle for Funding and EU Resources
The regional government also has another eye on changes that may occur in regional financing, with negotiations that, due to the parliamentary arithmetic needed by Pedro Sánchez’s government, are taking place bilaterally with Junts, the party led by Carles Puigdemont. The Canary Islands President, Fernando Clavijo, has already warned that the draft law that the Council of Ministers has sent to the Congress of Deputies regarding what is known as debt forgiveness harms the Canaries. Not only for being one of the most compliant communities but also because it could be the first step to integrating resources linked to the Economic and Fiscal Regime (REF) within the general regional financing system. “One of the things we will always defend is that for the Canaries, the separation of regional financing from REF funds is non-negotiable,” points out the Deputy Minister of Economy and Internationalisation, Gustavo González, after the Canary Islands Executive detected this intention and has even threatened to go to the courts to defend it if necessary.
If it were integrated into the distribution of funds at the regional level, “the REF would lose its purpose,” which is to put Canarians on an equal footing with the rest of the state’s citizens. “First, that must be fulfilled, and from there, distribution based on certain conditions,” states González. Therefore, the archipelago remains alert on this issue that also lends instability to 2026. But this national political paralysis also has repercussions domestically. Next year should see the crystallisation of many policies launched by the regional Executive. In previous years, a battery of measures has been deployed that has increased budgetary obligations. Reduction of waiting lists in healthcare or registrations in the dependency system that require more resources, at a time when the PGE are frozen in time.
Next year, the Canaries will also have to fight in Brussels. The reason? The intentions to dilute European funds into a totum revolutum. Resources that until now were directed in specific programmes to the Islands and which the Commission intends to amalgamate into state macro-projects, from which the archipelago will undoubtedly emerge losing. The negotiation of the new 2028-2034 multiannual financial framework—presented by the President of the Commission, Ursula von der Leyen—has put the Canaries on a war footing. The aim is to introduce 18 interventions, until now well differentiated, into a single financial package that each member state would manage. Thus, the money reaching the Canaries through strategies as vital as the Programme of Options Specifically Relating to Remoteness and Insularity (Posei) would be totally at risk.
If this were to happen and the Islands lost Brussels’ guardianship in the distribution of these funds, there is a risk that the distribution would not be made according to the needs of each territory—completely diluting the condition of an Outermost Region that the Canaries has—but based on parliamentary arithmetic. In this sense, the archipelago is negotiating and will continue to raise its voice before the European Parliament, Council, and Commission to prevent this intention from materialising. The main argument is that this remodelling violates Article 349 of the Treaty on the Functioning of the EU, which recognises the uniqueness of the ORs and obliges the Commission to safeguard their economic and social development. “We want to maintain at all costs our direct link with Brussels to guarantee our condition as an OR,” assesses Gustavo González, who acknowledges that this will be another of the tight bends the archipelago will have to face next year. The risk if it is not achieved is very high: the Canaries could lose about €2 billion annually. “We are going to deploy a significant battery of actions, with high-level meetings to fight the battle in Brussels,” explains Alfonso Cabello. Although the Executive led by Fernando Clavijo has already expressed hope that a special condition for the EU’s outermost territories can be achieved.
International Instability and Tourism’s Resilience
International instability on several fronts is another bend that the Canaries will have to navigate, should it occur, as uncertainty about what may or may not happen has been dominating forecasts for years. Fluctuations in the trade war between the United States and the rest of the world or armed conflicts, although they do not directly threaten the archipelago, can cause consequences at a logistical or connectivity level that end up affecting the main engine of our economy: tourism. We can be vulnerable through the effects on the economies of the main source countries, although, until now, international instability and economic difficulties that have already occurred in countries like Germany or France have affected tourist arrivals very little.
Thus, up to the accumulated figure for October this year, the number of visitors to the Canaries rose to 15.1 million people, 4.4% more than in the same period of 2024, potentially closing the year at a figure slightly above 18 million tourists, a new historical record. However, the sector’s dynamics have already given some signal that the pace is, at least, slowing down, and that, once again, we have to get used to more moderate growth or even a soft landing of the figures. What is certain is that this activity and the archipelago’s dependence on it meant the blow to economic activity was much greater in the region during the pandemic, but also that the take-off has been more pronounced from 2022 onwards. It seems that it is increasingly difficult to give up holidays, and this investment persists despite poor economic contexts or the significant price increases experienced by the sector. “What is certain is that it has become a natural part of the consumption expenditure of a large part of the European population, and that gives us strength,” explains the Professor of Economics, José Luis Rivero Ceballos, who clarifies that, at least in this sector, “there do not seem to be bad prospects.”
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