Published on Tuesday, July 19, 2022 | Updated on Tuesday, July 19, 2022

Spain | Madrid Economic Outlook. First half 2022

Madrid's GDP grew by 5,0% in 2021. But the war in Ukraine and sanctions reduce growth expectations. Thus, Madrid GDP is expected to increase by 4,3% in 2022 and 2,6 in 2023%. By the end of 2023, GDP could recover the level of 2019.

Key points

  • Key points:
  • GDP growth in 2021 was driven by the recovery of exports, household and business spending, and the impact of public policies of the several administrations.
  • A high increase in activity is expected in these two years, but the consequences of the invasion of Ukraine will weigh on the recovery and entail a risk on the scenario. Nonetheless, the impact on activity in Madrid through bilateral relations is less than in other Autonomous Communities, as is the effect through energy costs.
  • Bottlenecks, demand problems in Europe, and energy and intermediate product costs prevent the expected and necessary recovery of the industrial sector, and the difficulties in European demand reduce the prospects for exports of certain products. NGEU funds will be key to open and enhance alternative market niches, but it is necessary not to neglect digitalization.
  • By the end of 2023, activity in the region could recover 2019 GDP, a slightly higher advance than expected for Spain as a whole, and the unemployment rate could fall 1,3 pp over the biennium, to 10,3% in 2023.
  • Public policies will be key to minimize the effects of the war. The fall in the price of electricity will be important. In the absence of a rent pact, the uneven impact of inflation may increase social unrest. Uncertainty persists about investment linked to the NGEU and spending could leak into higher imports in the face of supply constraints.

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