Madrid moves away from Catalonia in two key economic indicators

Madrid moves away from Catalonia in two key economic indicators

The regions of Madrid and Catalonia have been the two great engines of Spain’s economy in recent decades. The annual growth of both regions and the absorption of labor from other regions has been key to boosting Spain’s GDP. However, in recent years, one of the two seems to be performing superiorly in economic terms, a trend that seems to continue to this day. After years of closing the gap, the GDP of the Community of Madrid and Catalonia reached almost the same level in 2017, year of the historic surprise. Since then, the gap in favor of the first has not stopped growing, with the exception of 2021year of post-pandemic recovery.

In 2000, Madrid generated just over 114,000 million, while Catalonia produced more than 122,000 million euros. The latest aggregate GDP data published by the INE (from 2021) show that Madrid’s economy generates more than 234,000 million euros per year, compared to 229,000 million in Catalonia.

CaixaBank explained in a special report on autonomies that the Community of Madrid leads the ranking by GDP size (aggregate). “Besides, Thanks to its greater relative growth, it has been gaining weight during the last two decades and its participation in the Spanish GDP has increased to 19.4% (17.7% in 2000).” During the same period of time, the weight of Catalonia in Spain has remained stagnant at 19%.

“The Madrid region has shown great demographic dynamism in recent decades, thanks to migratory flows, both from abroad and from other autonomous communities. With a population of 6.85 million inhabitants, 14.3% of the total, it is the third most populated region,” explain the experts from the Catalan bank. The population of Madrid has increased by 23% since 2001, while that of Catalonia has grown by just over 20%. A very small difference that does not by itself explain the ‘miracle’ of Madrid’s GDP. The key is the growth of per capita income, which in the end is what is known as the ‘lean’ growth of the economy, the healthiest increase in production.

The highest GDP per capita

However, the best performance goes beyond the bulk indicator of aggregate GDP, which is not the best yardstick to compare two economies, since population growth, for example, can distort the data. That is why it is more useful to use GDP per capita (a more refined indicator). Even considering this indicator, the Community of Madrid has done better and is already very far from Catalonia, with a gap that has continued to increase in recent years.

While the GDP per capita of Catalonia has grown by 54% since 2000 (at current prices), the GDP per capita of Madrid has grown by 63%, a differential of nine points that marks the difference between the two today. economies. While Madrid’s per capita income has distanced itself from that of Spain, that of Catalonia has even regressed.

Also, the economy of the Community of Madrid is distancing itself from that of Spain, which puts the long-awaited convergence in serious danger between the territories of the country. Not only in terms of aggregate GDP, where Madrid is the clear dominator. Also in terms of GDP per capita, the Community of Madrid is making a difference. The GDP per capita of the region already represents almost 137% of the average GDP per capita of Spain, a gap that has widened in recent decades.

This superior performance of the Madrid region occurs despite the fact that said community is the largest contributor to the financing system of the communities with a common regime. Madrid is the community that contributes the most by far (about 6.3 billion), three times more than Catalonia, which occupies second place. These resources will finance, for the most part, the regions that have ‘poorer’ economic and demographic indicators and that are vital for those regions to have quality public services. We must also take into account the benefits that being the capital of Spain generates for Madrid (presence of companies, the bulk of the central public administration…).

According to the latest report published by BBVA Research on the Madrid economy, the gap, far from narrowing, has been widening over the last ten years. BBVA economists have also maintained Madrid’s GDP growth forecast in 2023 at 3%, due to the good performance of consumption, industrial production and employment, and despite a slowdown in exports, both of goods and services. services, and investment. “In the last 10 years, Madrid accumulates an increase in real GDP of 11%doubling the Spanish average”.

According to the latest data published by the INE, the GDP per capita of the Community of Madrid has gradually distanced itself from the national average. If in 2000 the GDP per capita of Madrid residents represented just over 133% of the national average GDP, in 2019 this figure reached 137%, while in 2021 (last year available) it has reduced slightly to 136.6 %. This indicator reveals that each Madrid resident has an income of 34,821 euroscompared to 19,072 for Extremadurans, the region whose per capita income represents only 74.8% of the national average.

Catalonia’s economy stagnates

On the other hand, Catalonia has lost four points, going from presenting a per capita income that represented 121% of the national GDP to fall to 117%. This data contrasts with the aggregate GDP (the sum of all production in the region), which, as noted above, has gained weight for Spain as a whole. This means that if Catalonia has maintained its weight within the Spanish economy, it has been more due to the increase in population than due to good economic performance.

All in all, “Madrid has the highest GDP per capita in the country, 36.6% above the Spanish average. In recent years, its position with respect to the average has maintained a slightly upward trend. In productive specialization, The Madrid region stands out for its greater relative weight of professional and industry-related services. (41.5% vs. 29.2% of the Spanish average), in contrast to a very low weight of agricultural activities (0.1% vs. 2.9%) and manufacturing (6.2% vs. 12 .8%)”, explained the CaixaBank Research economists in the document.

Looking at INE data since 2000, it can be seen that the Autonomous Communities with the lowest income have not done too badly. Extremadura has come closer by more than 11 points to exceeding 74% of the national average income, while Castilla-La Mancha has also closed the gap and now exceeds 80% of the national average. However, other regions such as the Valencian Community or the Balearic Islands, which in 2000 were within the average or above, have fallen sharply since then.

Short-term risks for Madrid

Despite everything, Madrid’s economy faces important risks in the medium term: “The sectors that show a greater slowdown in job creation are the same ones that promoted it in the first part of the year and outside of Madrid capital. Consumption of Madrid households seems to stagnate, restricted by high interest rates, and will remain that way for a long period of time,” BBVA Research warns.

“External demand is also weakening, as shown by the data on exports of goods, card spending by foreigners or residents in other autonomous communities. The counterweight is the acceleration of investment, thanks to the support that may be assuming NGEU funds or pent-up demand of transport equipment” say the experts from the Spanish bank.

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