Spain is emerging from a protracted recession, marked by a return to moderate growth and rising international competitiveness. Decisive banking and fiscal reforms, coupled with supportive monetary policy from the European Central Bank, have reduced financial tensions and improved public finance. But to ensure that the recovery is sustained and unemployment returns to much lower levels, full implementation of on-going structural reforms and further measures to improve productivity and competitiveness are now needed, according to the latest OECD Economic Survey of Spain.
The Survey, presented in Madrid by OECD Secretary-General Angel Gurría and Spain’s Minister of Economy and Competitiveness Luis de Guindos, draws attention to the country’s steadily improving macroeconomic performance. It projects a gradual strengthening of GDP growth over the coming two years and improving public finances, but says that the government should continue with plans to reduce public and private debt. Recently introduced policies – such as profiling the unemployed to determine the level of assistance required and sharing best practices across regions – have been working and should be widely implemented. The focus should be put on effective activation policies.
“The courageous reforms enacted over the past two years are paying off,” Mr Gurría said. “The economy is growing again, employment is rising, the banking sector has stabilised and financial markets’ trust in Spain has increased. It is now crucial to build on these accomplishments, with new efforts to enhance growth, boost productivity, further improve competitiveness and get people back to work. We also need to ensure that the recovery is inclusive and the benefits are shared: many people are still facing hardship, and none should be left behind as the situation improves.”
The OECD identifies unemployment as Spain’s most pressing economic and social challenge – today’s exceptionally high unemployment is reducing incomes while increasing poverty and inequality. Strengthening job search assistance and training will help people get back to work.
Improving vocational training and boosting educational outcomes will be essential to prepare Spanish workers for the jobs of the future. In this regard, the OECD is working with the Government on a skills strategy to improve the pertinence of skills and the use of talent. The creation of high-quality, well-paid and sustainable employment also requires boosting growth, which calls for a shift to a new economic model based on creating and exploiting knowledge, the OECD said.
The Survey also indicates that the government reform agenda for a higher-performing business sector is progressing: insolvency procedures are improving, non-bank financing alternatives are under development; and implementation of the Market Unity Law should help reduce regulatory fragmentation.
However, there is still room for improvement. Spain can build on these reforms by cutting employer social contributions for low-skilled workers, which would boost both job creation and international competitiveness. Similarly, rules covering entrepreneurship and investment – key components of the knowledge economy – need to be revamped, to reduce barriers that prevent firms from starting, entering markets and growing. Efforts to remove barriers to competition are also needed in the professional services sector and in some market sectors, such as electricity (OECD).