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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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