Economic differences between Spanish regions remain large

by Lorraine Williamson
economic change

MADRID – The geographical distribution of wealth in Spain has hardly changed over the past twenty years. Only the two poorer regions of Galicia and Extremadura have per capita income crept slightly closer to the national economic average. 

Aragon is the only region where income has returned to pre-pandemic levels. This is evident from the latest data from INE, the Spanish National Statistics Institute. The conclusion is striking because the Spanish economy has had to deal with considerable turmoil in the last twenty years. Among other things, due to (the collapse of) the real estate bubble, the credit crisis and last but not least the corona pandemic. 

Biggest economic blows in tourist areas 

The general trend is that the Madrid region and the industrialised regions have weathered the storms well. The blows have mainly fallen in areas that depend on tourism. The latter development had already been initiated before corona, but the pandemic has given those areas the death blow. 

The fact that the differences between the regions have hardly changed this century is a break in the trend. Various studies have shown that the poorer regions increasingly caught up with the rich regions in the second half of the twentieth century, although the pace of this slowed down towards the end of the last century. 

The gap between the poorest region (in 2000 this was Extremadura) and the richest region (then and now Madrid) has narrowed somewhat in this century, but the differences are still very large. Extremadura and Galicia have recovered somewhat, but growth in other traditionally poor regions such as Andalucia has stalled. 

On the Spanish islands in the Mediterranean and the Canary Islands, average incomes have even fallen sharply over the last two decades, by 17% and 19% respectively. Those islands mainly rely on tourism. The bursting of the real estate bubble has also hit them extra hard. 

The ‘capital factor’ of Madrid 

It is also striking that the Madrid region seems to be slightly expanding. In Catalonia, the average income per capita increased by just under 3% between 2020 and 2021, and in the Madrid region by 9%. Madrid simply has the ‘capital factor’. This is where the ministries and many corporate headquarters are located, and therefore also the people with the highest incomes. The Madrid economy grew by about 3% during that period. That is well below the growth of Extremadura (11%), but that region has a long way to go. 

Only Aragon is back to the pre-pandemic level 

Of all regions, only Aragon has seen its per capita income return to pre-pandemic levels. According to experts, this is because the Aragonese economy mainly relies on the (agro) industrial sector, the car industry and agriculture. Aragon is not as focused on the service sector or tourism as other regions. As a result, the corona crisis hit Aragon less hard. Another factor is the strategic location of Aragon, as a connector between the economically important regions of Catalonia, Navarra and the Madrid region. 

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