According to Eurostat data, the Community of Madrid recorded a GDP of €293 billion in 2023, and another increase of around 3% in 2024. This places the community of Madrid as the EU’s 4th largest regional economy. Madrid’s economy has grown by almost 50% since 2012, largely fuelled by new residents, strong tourism, job creation, foreign investment, and most importantly, the entrepreneurship and creativity of the people. The unemployment rate has dropped to 9%, and the employment rate now sits at 70%, which is the average for the EU.
Madrid’s Minister of Economy, Rocío Albert, attributes this success to legal stability, business-friendly policies, and low taxation, and claims that Madrid now competes with London, Paris, and Berlin. We need to clarify, though, whether she is referring to Madrid the economy or Madrid the people? These two things can be quite different.
While Madrid’s GDP per capita is estimated at €42,000, it should be noted that GDP per capita is a financial average that includes corporate profits, wealthy individuals, and multinational income, and is not in fact a reflection of average salaries. In reality, the median income in Madrid hovers around €24,000 per person. There is in fact quite a gap between statistical prosperity and the actual monthly experience of the residents who face rising real estate costs, inflation, and an overall high cost of living.
Low taxation has for many years been a central feature of the region’s economic model. Madrid offers zero wealth tax, near to zero inheritance tax, tax breaks for self-employed workers (autónomos) and deductions for families and births. They also offer some of the lowest personal income tax rates in Spain, and deductions for new companies and startups.
Soon to be included is the upcoming “Mbappé Law,” which is targeted towards attracting foreign investors. Supporters argue that this will boost investment and employment, while critics suggest it only creates tax advantages for the wealthy because locals won’t get the same benefits. There’s also concern about whether these types of tax strategies (which have recently been adopted in Portugal and Italy) will actually serve the general society, or mainly offer a favourable GDP growth narrative for politicians – as already seen in the disparity between GDP per capita and actual median income.
Still, the outlook for Madrid, and Spain in general, is positive. CaixaBank Research reflects that Madrid’s economy grew more than 3% in 2024. And with expectations of another 3% growth in 2025, the region is well positioned for further economic growth.
But growth alone isn’t everything. Madrid’s success must be measured not just in GDP rankings but also in quality of life, income equality, and affordable housing. Without reforms to address these imbalances, economic strength could be more of a clickbait headline rather than the day-to-day reality of its residents.
