Axesor Rating confirms Madrid's credit rating of A with stable outlook and Barcelona's credit rating of A with stable outlook.

18th December of 2019

Axesor Rating, first rating agency that evaluates Madrid in recent years, confirms an unsolicited credit rating that reflects the good performance of the municipal economy, the deep recovery of the labour market and the gradual consolidation of public finances.

Barcelona's unsolicited credit rating confirmed by Axesor Rating reflects the positive performance of the municipal economy, the dynamism of the labour market, with an unemployment rate that is significantly lower than the Spanish average, and the ongoing fiscal consolidation path.

Unsolicited ratings of the cities of Madrid and Barcelona

The unsolicited credit rating of A with stable outlook for Madrid reflects the growth potential of the municipal economy and our expectation that it will grow at rates above the national average by the boost of the service sector and construction. However, the municipal economy is not immune to the slowdown shown by the national economy, which presents an important challenge, considering the limited margin of the municipal fiscal policy .

The unsolicited credit rating of A with stable outlook for Barcelona reflects the positive forecast of economic growth, largely based on tourism. Barcelona, however, will not be able to avoid the impact of the slowdown of its European trading partners. However our credit rating highlight the fiscal consolidation of its public finances

Madrid, December 13th, 2019

Axesor Rating informs that it confirms the unsolicited credit rating of the city of Madrid of A with Stable outlook and the unsolicited credit rating of the city of Barcelona of A with Stable outlook.


The unsolicited credit rating of A with stable outlook is based on the positive evolution of Madrid's economy, with projected growth rates of 2.5% by 2019 and 2.1% by 2020, above our forecast for the Spanish economy of 2% for 2019 and 1.6% for 2020 due to the good performance of the service sector and construction, improved productivity and population growth.

The credit rating values the dynamism of the labour market, with a decreasing unemployment rate which closed the second quarter of 2019 at 10.4% of labour force, below the 14.1% registered in Spain. However, there are still significant imbalances in the labour market, as a result of youth and long-term unemployment. Although unemployment amongst the youngest would have fallen in 2019, this decrease continues to be insufficient. Besides, unemployment amongst older workers remains high.

Madrid's GDP per capita (43,622 euros) leads the national ranking just behind Barcelona and exceeds the Spanish average (25,730 euros) and that of the EU-28 (26,100 euros), but is accompanied by persistent social inequality, with a people-atrisk rate that stood at 26% of population at the end of 2018. It was lower than the Spanish average (27%) but higher than that of Barcelona (24%), and the average rate of French or Dutch cities (20%) and Norwegian cities (almost 15%).

Although higher external and internal immigration had a positive impact on the average degree of ageing and contributed to the population increase, our credit rating continues to be constrained by growing ageing, with an average dependency ratio of 53% at the end of 2018. The dependency ratio of the over-65 population is 31.1%, almost three percentage points higher than ten years ago, which presents a challenge to public management in terms of social benefits and basic public services.

The credit rating values the strengthening public finances shown by the City of Madrid in recent years. We expect the situation to remain in 2020 following the Preliminary Budgets, due to the improvement in gross operating balance, debt and liquidity. The Preliminary Budget stands out for its marked expansive character due to the expected good performance in the collection of the main direct taxes and Personal Income Tax, together with the 9.8% increase expected in the collection of VAT. However, even though per capita tax revenues continue to be the highest of the large Spanish cities, the level of spending and investment is below its equals.

The indebtedness is still the highest amongst Spanish cities (2,689 million euros at the end of the third quarter of 2019), situation that improves in proportion to current income. However, Madrid has faced a significant reduction, two-thirds lower than the levels showed five years ago. We expect the situation to remain in next year. The level of liquidity positions presented by the City Council will continue to improve as well. However, it should be noted that the City Council continues to allocate almost 7% of its current income to meet the financial burden, although early repayments and lower interest would have meant a significant improvement.


The unsolicited credit rating of A with stable outlook is based on the positive performance of Barcelona's economy in the first two quarters of the year, with yearon-year growth of around 2.6% and 2.5% respectively, that are above the Spanish average (2.2%), reducing the gap with Madrid due to the dynamism of the service sector - underpinned by a leading position in tourism in the ranking of visitors and overnight stays - and of construction, in contrast with an industry with a negative performance in the first half of the year.

The economic dynamism will continue in the coming years, although it will slow down due to the uncertainties affecting the national and global economies. It is important to highlight the correction in the labour market, with an unemployment rate that closed the third quarter of 2019 at 9.4%, significantly below the 14% recorded by Spain in the same period and almost a percentage point below that of the city of Madrid. Barcelona's GDP per capita (49,900 euros) remains unchanged and, just ahead of Madrid, leads the national ranking, almost doubling the Spanish average (25,730 euros), as well as the EU-28 average levels (26,100 euros).

Our credit rating takes into account the positive demographic evolution of recent years, largely due to the immigrant population increase and its positive effects over the demographic structure. The challenge of population ageing remains, with a dependency rate of 52.8%. This factor represents a major challenge for the future growth potential of the economy, as well as the high rate of people-at-risk of poverty and social exclusion (around 24.4% according to the AROPE indicator at the end of 2018), and the persistent problem of public insecurity, which could negatively affect tourism, one of the main drivers of economic recovery.

Axesor Rating highlight the fiscal consolidation process of recent years, with a Preliminary Budget for 2020 that, despite a marked expansive nature, maintains the gross operating balance and debt figures of previous years. In the absence of a General State Budget, Barcelona City Council has made a prudent forecast for the collection of the main tax figures. The good financial situation of the city has allowed a increase in real investments to 440 million euros -272 euros per inhabitant compared to the 211 euros budgeted the previous year-. The positive process of budgetary consolidation has reduced its debt dependency, although it should be noted that Barcelona maintains a stable debt of around 812 million euros by June 2019, despite having reduced it by almost 30% compared to 2012.

The credit rating assesses Barcelona City Council's good level of liquidity, with a cash surplus for general expenses that, by December 2018, was more than sufficient to cover the scheduled maturities for 2019.

Concerning the political situation, the extension of the government team after the municipal elections and the agreement between of the leftist platform Barcelona in Comú and the social-democrat PSC, with the support of the former French Prime Minister Manuel Valls and two other councillors, gives stability to the consistory, although there are some uncertainties regarding past events and the tensions that might exist with the pro-Catalan independence ERC.