Madrid evolved incredibly through the Middle Ages and established itself as a new capital of the Spanish Empire. Madrid continued to be the centralized administrative authority of Spanish Kingdom. This helped Madrid to become the nucleus of Industrial revolution of 19th century. During 20th century especially after city took longer strides in development and become home to industries like motor vehicles, aircraft, chemicals, electronic devices, pharmaceuticals, processed food, printed materials, and leather goods. Madrid is now Spain's second largest industrial center after Barcelona. The city continues to be the center of national government, finance and insurance. Apart from the capital of industrial sector Madrid is also one of the most important center for publishing of Spanish language materials.
During the period from 1992 to 2006, Madrid experienced a boom in infrastructural developments. Housing and public works such as the ring roads and train networks have become pillars of the economy.
In the span of 2004 to 2006, Madrid was the fastest growing city among the other Spanish cities. It grew faster by 1.4% than other Spanish cities and by 13% than rest of the Euro zone. Such astronomical growth placed Madrid at 23rd place among the richest cities in the world. The absolute GDP of $201.5 billion for the year 2005 earned Madrid a 3rd place, ahead of Moscow and Barcelona and behind the relatively larger cities of Paris ($460 billion) and London ($452 billion). Madrid's high GDP per capita makes it richest in Spain and one of the richest in Europe.
Madrid along with Barcelona and Lisbon attracts most foreign investment and job seekers. One of the reasons for this are the higher wages in Madrid with averages around 2004€ in 2007 which is clearly above the Spanish average of 1686€.
The moderation trends in the global markets have triggered the restrictions on credit policies. Despite the loss in economic momentum which came into existence due to recession that started in late 2008, the employment in the Madrid’s Autonomous sector has grown by 0.8% in YoY (year-on-year) basis in the second quarter of 2008. The revised YoY GDP growth is predicted as 2.1% for year 2008. The second quarter of 2008 has seen increment by 19.3% for credit to the private sector. But this is less by 13 percentage points in the same quarter of 2007. Although the credit lending rate to private sector continues to rise at a higher rate than the rate for Spain as a whole.
At a time of current economic downturn, ‘Tourism’ is a sector in which employment is not destroyed but rather it is maintained or is even increasing. The YoY growth rate in the number of employees reached 7.2% in August 2008.
The upturn in inflation in the Madrid region is in control and was less intense than in Spain as a whole. The latest predictions suggest that inflation rate will be around 3.2% at the end of the year and is anticipated to be moderated further in 2009.
The Spanish Government, independently & in association with Euro group is taking steps to combat the credit crunch.