La Palma's Economy Shows Mixed Results in Q2 2025 Amid Sectoral Challenges
La Palma's economy shows signs of recovery in Q2 2025 but faces serious challenges in tourism and banana exports.
Key Points
- • Employment rate rises to 50.8%, unemployment drops to 12.1%
- • Business confidence declines: overall down 4.3%, hotel sector down 29%
- • Tourism sees mixed results: domestic up 29.6%, foreign down 16.5%
- • Banana exports decrease by 29% due to volcanic eruption impacts.
In the second quarter of 2025, La Palma's economy has displayed signs of recovery, highlighted by improvements in employment rates, although significant challenges persist within the tourism and banana export sectors. The latest report from Corporación 5 for the Federation of Employers of La Palma (Fedepalma) reveals that the employment rate has risen to 50.8%, marking the second highest level on record, while the unemployment rate has fallen to 12.1%, reflecting a substantial improvement of 5.7 percentage points compared to a year earlier.
As of June 2025, the number of businesses registered with Social Security reached 2,554, which surpasses pre-pandemic levels. However, this positive trend is tempered by a decline in overall business confidence. The Harmonized Business Confidence Index saw a drop of 4.3% year-on-year, with the Hotel Confidence Index experiencing a steep decline of 29%, indicating waning optimism in the hospitality sector.
The construction sector demonstrated robust growth, with cement sales increasing by 6.7% compared to the previous year and a modest rise of 1.2% in energy availability. However, the tourism sector is under pressure, particularly in light of the sharp 16.5% decrease in foreign tourist arrivals, despite a notable 29.6% surge in domestic tourism during June. The hotel occupancy rate was recorded at only 37.9%, coupled with a 12.3% drop in revenue per available room (RevPAR) compared to the previous year.
In addition to tourism woes, the vital banana export sector faced a significant setback, with exports falling by 29% through May 2025. This decline is largely attributed to the devastation caused by the volcanic eruption in 2021, which resulted in substantial loss of arable land vital for cultivation.
Despite these challenges, the reports indicate an underlying resilience within La Palma’s economy as it continues to adapt to the evolving circumstances. The mixed results signify both progress and the need for ongoing support to address the setbacks in key sectors.