The economy is based primarily on tourism, which makes up 32% of the GDP. The Canaries receive about 12 million tourists per year. Construction makes up nearly 20% of the GDP and tropical agriculture, primarily bananas and tobacco, are grown for export to Europe and the Americas. Ecologists are concerned that the resources, especially in the more arid islands, are being overexploited but there are still many agricultural resources like tomatoes, potatoes, onions, cochineal, sugarcane, grapes, vines, dates, oranges, lemons, figs, wheat, barley, maize, apricots, peaches and almonds.
Water resources are also being overexploited, due to the high-water usage by tourists. Also, some islands (such as Gran Canaria and Tenerife) overexploit the ground water. This is done in such degree that, according to European and Spanish legal regulations, the current situation is not acceptable. To address the problems, good governance and a change in the water use paradigm have been proposed. These solutions depend largely on controlling water use and on demand management. As this is administratively difficult and politically unpalatable, most action is currently directed at increasing the public offer of water through import from outside; a decision which is economically, politically and environmentally questionable.
To bring in revenue for environmental protection, innovation, training and water sanitation a tourist tax was considered in 2018, along with a doubling of the ecotax and restrictions on holiday rents in the zones with the greatest pressure of demand.
The economy is € 25 billion (2001 GDP figures). The islands experienced continuous growth during a 20-year period, up until 2001, at a rate of approximately 5% annually. This growth was fuelled mainly by huge amounts of foreign direct investment, mostly to develop tourism real estate (hotels and apartments), and European Funds (near €11 billion in the period from 2000 to 2007), since the Canary Islands are labelled Region Objective 1 (eligible for euro structural funds). Additionally, the EU allows the Canary Islands Government to offer special tax concessions for investors who incorporate under the Zona Especial Canaria (ZEC) regime and create more than five jobs.
Spain gave permission in August 2014 for Repsol and its partners to explore oil and natural gas prospects off the Canary Islands, involving an investment of €7.5 billion over four years, to commence at the end of 2016. Repsol at the time said the area could ultimately produce 100,000 barrels of oil a day, which would meet 10 percent of Spain’s energy needs. However, the analysis of samples obtained did not show the necessary volume nor quality to consider future extraction, and the project was scrapped.
Despite currently having very high dependence on fossil fuels, research on the renewable energy potential concluded that a high potential for renewable energy technologies exists on the archipelago. This, in such extent even that a scenario pathway to 100% renewable energy supply by 2050 has been put forward.
The Canary Islands have great natural attractions, climate and beaches make the islands a major tourist destination, being visited each year by about 12 million people (11,986,059 in 2007, noting 29% of Britons, 22% of Spanish (from outside the Canaries), and 21% of Germans). Among the islands, Tenerife has the largest number of tourists received annually, followed by Gran Canaria and Lanzarote. The archipelago’s principal tourist attraction is the Teide National Park (in Tenerife) where the highest mountain in Spain and third largest volcano in the world (Mount Teide), receives over 2.8 million visitors annually.
The combination of high mountains, proximity to Europe, and clean air has made the Roque de los Muchachos peak (on La Palma island) a leading location for telescopes like the Grantecan.
The islands, as an autonomous region of Spain, are in the European Union and the Schengen Area. They are in the European Union Customs Union but outside the VAT area. Instead of VAT there is a local Sales Tax (IGIC) which has a general rate of 7%, an increased tax rate of 13.5%, a reduced tax rate of 3% and a zero tax rate for certain basic need products and services. Consequently, some products are subject to additional VAT if being exported from the islands into mainland Spain or the rest of the EU.
Canarian time is Western European Time (WET) (or GMT; in summer one hour ahead of GMT). So Canarian time is one hour behind that of mainland Spain and the same as that of the UK, Ireland and mainland Portugal all year round.