The OECD revised upwards its growth forecast for Spain this year at 1.8%, one tenth more than what was anticipated in February and four more than in November, but warns of the high level of public debtin which pensions are going to weigh more and more with the latest reform.
In the semiannual Outlook report that the Organization for Economic Cooperation and Development (OECD) publishes this Thursday, Spain once again stands out from the other large European economieswhich have suffered almost stagnation since the beginning of the Russian invasion of Ukraine in February 2022, and for which a more than timid recovery is expected in 2024 and 2025.
Spain, which with a growth of 2.5% in gross domestic product (GDP) last year placed itself at the head of the euro zone, will grow in 2024 more than double 0.7% expected for all members of the single currency. And the same will happen when compared to France (0.7%) and Italy (0.7%), not to mention Germany (0.2%).
Less than the Government
That 1.8% is very close to the 1.7% that the European Commission predicted for Spain in mid-February, but it is less optimistic than the Government, which in the forecasts it has just sent to Brussels it hopes to reach 2%.
For 2025, the OECD has not changed its forecast of 2%. which is almost coincident with most of the current organizations.
In his analysis of Spain, he highlights as one of the main vectors of the activity the private consumption, with an increase of 2% this year and 2.1% next year, thanks to the strength of the labor market (the unemployment rate should fall from an average of 12.1% in 2023 to 11.7% in 2024 and 11.3% in 2025) and to the gains of purchasing power.
These gains will be possible to a large extent due to the reduction of inflationwhich should drop from 3.4% in 2023 to 3% this year and 2.3% next year.
Bump in investment
The other side of the coin is investment, which like last year is going through a bump and will only progress by 0.7% in 2024, before recovering 3% in 2025. And something similar can be said of foreign trade, which will subtract two tenths from GDP this year and will have zero impact next year.
The OECD issues a warning to Spain (which is directed at a good part of its member countries) on the weight of the debt, which it considers “high”: 107.7% in 2023 which, according to its calculations, will drop one point to 106.7% in 2025.
The specific problem that the OECD points out to Spain is the increasing pension spendingin clear allusion to the reform of Minister José Luis Escrivá that he had already criticized in the past, “to the detriment of the items that favor growth.”
Tax adjustment
That is why he says that in the medium term we need a fiscal adjustment to “maintain the debt on a downward path, comply with EU fiscal rules and create room for spending on future priorities.
In fact, to short term is not as optimistic as the Government, which in its forecasts to Brussels promises that the deficit will go from 3.6% of GDP in 2023 to 3% this year and 2.5% next year. The OECD remains with 3.3% in 2024 and 2.6% in 2025.
The adjustment you recommend would have to come, first of all, from aid measures on energy prices more selective, aimed at the most vulnerable.
Also for the gradual expansion of the VAT base (i.e. the reduction of the reduced rate for many products and services), and an increase in environmental taxes.
In parallel, what is known as the ‘developed countries club’ advises measures for sustainable growth, hand in hand with increased productivity thanks to innovation, improved education and workers’ qualifications, and also active employment policies to adapt the workforce to the needs of the market.
