Spain | Madrid Economic Outlook 2025

Summary

In 2024, Madrid' GDP could have grown by 3.1%, and is expected to increase by 2.8% in 2025 and 2.0% in 2026. This strength is attributed to the robust performance of the services sector, particularly in tourism, as well as the domestic demand, where consumer spending has been increasing its weight.

Key points

• Key points:
• If these forecasts are met, regional GDP in 2026 would exhibit a 14 pp increase compared to 2019 level, marking the second strongest recovery in Spain. Furthermore, the unemployment rate could fall to 8.1% on average in 2026 and 135,000 new jobs could be created in the 2025-2026 biennium.
• Employment dynamism is being concentrated mainly in the capital, although the rest of the region has shown an acceleration in job creation with respect to 2023.
• Lack of investment, particularly in the housing market, is a bottleneck to growth. Rising labor costs may slow job creation. Aging restricts the contribution of household consumption, slows labor market participation and increases dependence on immigration which is concentrated in low-productivity jobs.
• The outlook is conditioned by a particularly uncertain environment dependent on the global context. Tourism and goods exports are particularly vulnerable, as they face uncertainties related to the stagnation of European demand, possible changes in German fiscal policy, the impact of potential tariff increases by the US, changes in the cost of energy and economic policy uncertainty in general.

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