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OECD Territorial Reviews: Madrid, Spain 2007

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Madrid has experienced impressive dynamic economic growth in recent years, making the best of the positive business cycle in Spain. The capital region absorbs more than a half of the total FDI in Spain and has extended its economic relations with Latin American countries. Growth has occurred largely in the service sector (financial, banking, business services) as well as in logistics (Madrid Barajas Airport is the largest employer in the region). The large investment in public goods, and particularly in transportation infrastructure and cultural amenities, has contributed to attracting firms and workers, creating a virtuous cycle of accumulated wealth. Unemployment has reached a low level (6.5% in 2006) and the growth rate has surpassed the national average as well as the average for OECD metro-regions. There is, however, a concern with how to sustain this positive economic path in the long run. The main challenges to be addressed include a relatively low productivity level, insufficient specialisation in high-value added manufacturing activities, a low innovation capacity, job-skills mismatches (especially for immigrants), transport congestion and housing rental shortage. Public policy making and the governance framework have evolved to provide the metro-region with many of the institutional resources that are needed to make decisions and effectively implement public policies. However, some adaptations will be necessary to effectively address the forthcoming challenges.

The Territorial Review of Madrid is integrated into a series of thematic reviews on metropolitan regions undertaken by the OECD Territorial Development Policy Committee. The overall aim of these case studies is to draw and disseminate horizontal policy recommendations for national governments.

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Assessment and Recommendations

Madrid has captured advantages of globalisation by becoming a Metroregion of 6 million, which attracts foreign workers and firms. Since the mid- 1990s, the capital region of Spain has enjoyed one of the highest expansions in population and economic growth within Europe and among OECD metropolitan areas. From 1995-2005, the metro-region has registered an average annual growth rate of 3.7%, above Spain’s 3.3%, and growing at twice the average of the European Union for the same period. This economic boom has made the metro-region a magnet for workers, both at the national and international level (population grew by 15.4% over 2000-2006 in Madrid), with an influx of foreign migrants, mainly coming from Latin American countries. From 2000 to 2006, 760 000 new jobs were created and unemployment declined from 11.6% to 6.5%. Today, the capital region concentrates more than 13.5% of the national population and generates above 17% of Spain’s output. Madrid is the Spanish financial centre, concentrating around one-quarter of total savings and responsible for around two-thirds of both total inward and outward foreign investments (from 2002 to 2004, Spain was the 6th largest recipient of FDI worldwide and the 5th largest in Europe).

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