The health of Madrid’s economy continues to recover. This 2018, if the forecasts are met, will close for the fourth consecutive year with growth above 3%. This is indicated by the BBVA Research Department in its latest report, Situation Madrid, which was presented yesterday by the head of Macroeconomic Analysis of BBVA Reseach, Rafael Doménech, and the director of the Territorial Center of BBVA, Juan Carlos Hidalgo.
Despite the “good news” of growth, which will stand at 3.2% this year due to the good performance of domestic demand and that “will create 135,000 jobs” until 2019, according to Hidalgo, the Madrid economy appreciates signs of deceleration: in 2016 GDP grew by 3.6%; in 2017, 3.4% and in 2019, it is expected to do so by 2.6%. Although the data of recent years place the growth of the country and that of the region at similar levels, the economy of Madrid registers better forecasts for the next two years than the whole of the nation, where the Bank of Spain foresees an increase of 2%. , 6% this year and 2.2% next.
The report lists the factors, internal and external, that could alter the growth of the community and points out that the global and European environment, where moderate growth is expected, will have an impact on the development of Madrid’s economy. And it takes into account in the regional numbers the normalization of interest rates, the financial tensions in emerging economies , the intensification of tariffs in the US and China, as well as the risks of the risk premium, the situation in Italy, the level of US indebtedness or the Brexit.
In addition, within Spain, BBVA notes that “the uncertainty about economic policy remains high, although the tension related to the political environment in Catalonia has been reduced”. And he hopes that the Government of the Community of Madrid will meet the deficit target, as well as that, in 2019, budgetary control can coexist with the campaign in the May elections.
“We must try to reduce internal uncertainties, because there are still vunerabilities in Madrid such as high unemployment rate, temporary or high public deficit and public debt,” said the head of Macroeconomic Analysis of BBVA Research.
“The forecasts are quite favorable for the Community of Madrid,” said Doménech, who said that “the slowdown we are seeing in the Spanish economy and, to a lesser extent, in Madrid, has to do in part by a slowdown in demand This is already predicted “and also with” the weakness of some external variables, such as the lower growth of exports of goods and the deceleration of tourism “.
This smaller increase in domestic demand is mainly due, according to the analyst, to the “exhaustion of the so-called dammed demand”, that is, of those expenses that were postponed during the crisis (purchase of vehicles, household appliances …), which They emerged again with the recovery and now they have stabilized.
“Something similar has happened with tourism,” said Doménech, who explained that the “geopolitical tensions of countries like Tunisia or Egypt caused many tourists to travel to Spain and Madrid” but now, that, “is exhausted and reversed.” Although we must take into account, said the analyst, “the slowdown in tourism has been less intense in Madrid than the rest of Spain.”
The “negative surprise” of this deceleration of the Madrid economy that the report gathers is provided by exports of goods, although it is expected that the depreciation of the euro and the growth of the Eurozone will help this parameter to recover its dynamism.
Within these signs of deceleration in the region, there is also the rebound in the price of oil, which is having a negative effect on the disposable income of households and the production costs of companies.
According to BBVA’s forecast, in 2018 and 2019 the housing sector will be consolidated, although “with asymmetry”, because in Madrid, Doménech maintained, “prices rise more than employment in construction”. The analyst also explained that in the second quarter of 2018, the sale of housing in the Madrid region has reached 70% of the maximums that were registered before the crisis, above the rest of the Autonomous Regions.
Regarding employment, BBVA expects that between the end of 2017 and 2019 it will be possible to create something more than 135,000 jobs (2.7% in 2018 and 2.2% in 2019). This would reduce the employment rate to 11.4% by the end of that period (in 2018 it would be 12.5%), although it would still be 2.3 percentage points below the pre-crisis level. However, “large urban areas of the Madrid belt are with a level of employment 5% higher than before 2007,” said Doménech.