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Interview with Antoni Riera, technical director of the Fundació Impulsa Balears and professor of Applied Economics at the UIB
Allusions to another potential economic crisis have once again become an every-day occurrence in the media. What is your point of view as an economist and what data does Impulsa Balears have to hand to forecast what is to come in the short term?
2019 is ending, in almost all the world’s economic areas, with a lower growth rate than that of the previous year. The Balearic Islands are no exception. The economic forecasts available for 2020 pull down the Balearic Islands’ economic growth marker still further.
Still, the indicators aren’t necessarily pointing towards another recession, but rather towards a period of “low growth” or stagnation as occurred in Japan after its real estate bubble burst in the nineties. The indicators are very clear on this. Most, irrespective of their badge, are losing acceleration, which is a prelude to lower growth rates.
In any event, the intensity and duration of this bout of deceleration will depend, on the demand side, on families’ ability to maintain their expenditure and, on the supply side, on the ability to maintain public and private investment and redirect it towards improvements in productivity. We have sufficient margin to do this. Otherwise we will suffer the consequences in 8 of 10 quarters’ time.
This region’s GDP depends on the tourist industry. What measures should be taken to ensure that our model continues to be an international benchmark and, at the same time, to achieve a strong economy less dependent on the loss of purchasing power in the source markets?
The Balearic Islands is and will continue to be a tourist economy. Nevertheless, we have to acknowledge that the location-prices-rooms equation is getting out-of-date. It no longer guarantees the return we deserve, either from the private or from the social point of view. Improving sector operators’ return on investment and guaranteeing tourism’s contribution to regional revenue and its positive contribution to the social and environmental balance of the islands today means reformulating our strategy. With good reason, reformulating is the first step towards creating a new reality. We have to do away with the idea that the Balearic Islands is a mature destination and start proclaiming that it is a sophisticated destination.
We know the product, we know the channels, we know the customer…We can and must find the formula by which we can stand out based on a very resolute commitment to create more value. Volume no longer highlights our attractiveness.
Can you explain the main role of the Fundació Impulsa Balears, with whom the Bufete Buades law firm works directly.
The Impulsa Balears Foundation is the result of a strategic commitment by CAEB, The Government of the Balearic Islands and an ever-increasing number of companies in the islands, convinced that promoting the archipelago’s global competitiveness is key to facilitating the Balearic Islands’ economy’s transit towards a more advanced state of economic development, in a context in which the islands are rapidly falling back down the order. To do this, the Foundation provides the region’s stakeholders with the strategic knowledge and the mechanisms necessary to move forward together, through the identification of strategic needs, the proposal of new value-generating formulas and the optimum exploitation of the existing capabilities.
If you were responsible for this autonomous region’s economic and employment policies, where would you aim them in order to promote stable business sectors that are alternatives to or complementary to the tourist sector.
If I found myself in that predicament, I would orient policies, not only the economic and employment policies, but also the environmental and social policies, towards focusing on the “how we grow”. Today, most of the proposals that aim to alleviate the tension between the economy-environment and society continue to focus on “how much will we grow” or “how much should we grow”.
However, the solution to our problems is in the “how we grow”. Because behind the “how we grow” hides the degree of efficiency with which society is using the resources it has available. Because behind the “how we grow” hides the degree of innovation a society has when it comes to conceiving technical solutions that enable value creation. Because behind the “how we grow” hides the degree of equity with which society distributes revenue and guarantees the ability of its members to contribute to and benefit from progress.
Three issues: efficiency, innovation and equity, a path on which the Balearic Islands have a long way to go and will find it difficult to complete if they continue to focus on the how much.
The word competitiveness is uttered again and again when talking about the economy. What specific measures are required to strengthen it? Is wage containment absolutely necessary? Doesn’t this directly reduce consumption and therefore companies’ turnovers? What other options are there?
In a rapidly-changing context like the current one, not only is technology, geopolitics changing. The concepts, the paradigms are changing too. Today, we can no longer approach competitiveness from the traditional and reductionist concept of competitiveness-price and put prices, wages and the exchange rate at the centre of a competitiveness strategy. Because nothing today is the same as it was yesterday. Today competitiveness depends on a broad set of factors that determine the ability of a country or region to generate goods and services that meet the requirements of the international markets and to improve the quality of life of its population at the same time.
From this point of view, in the latest reports published by the Impulsa Balears Foundation, the archipelago lies in 173rd place in the global competitiveness index comprised of 264 European regions. This result continues to put the islands in a “low” competitiveness segment that encompasses strengths and profound weaknesses. With this in mind, we obtain a good score in basic pillars –such as health (12), infrastructures (38) and basic education (81)–, but we fail in efficiency drivers –such as higher education (223) and employment market efficiency (196)– and in innovation drivers –mainly in terms of businesses’ sophistication (163) and innovation capacity (195).
We have to improve these positions, there’s no other option. Work on competitiveness to gain in prosperity. Be, in short, both parties to and participants in the future.