- The growth projection for 2017 rises two tenths, up to 2.5%, and the unemployment rate drops to 17.5%
- The reduction of the public deficit since 2012 has been considerable, but the objectives to reduce debt must be met
- The tax and transfer system reduces inequality and poverty, although families with children must be supported more
- The financial reform helped stabilize the sector and increase credit and does not presently raise solvency doubts
The Organization for Economic Cooperation and Development (OECD) believes that the recovery of the Spanish economy is solid, thanks to the set of structural reforms adopted by the Government. This is stated in the report. Economic Review-2017 Spain presented today in Madrid by the Secretary General of the OECD, Ángel Gurría, and the Minister of Economy, Industry and Competitiveness, Luis de Guindos. The OECD forecasts for Spain improve for 2017 compared to last fall. The economy will grow 2.5% (two tenths more) and the unemployment rate will drop to 17.5% (two tenths less), in line with government forecasts.
The OECD considers that the Spanish recovery is one of the strongest due to the wide range of structural reforms carried out, the consolidation of the financial system and fiscal policy. It points to other growth drivers common to other countries such as the expansionary monetary policy, low oil prices and the depreciation of the euro. The internal risk for Spain focuses on the difficulty of continuing the reforms because the Government does not have a sufficient majority. From abroad, uncertainties would come from possible turbulence in financial markets, the slowdown in world growth, trade wars, a disorderly Brexit and a deterioration of the European banking system.
In this regard, the OECD emphasizes that the Spanish banking system comfortably meets the solvency regulatory requirements. It recognizes that the banking reform helped to stabilize the financial sector and contributed to an increase in credit thanks to improved entities' access to markets. Now the sector is significantly stronger, underlines the report. Beyond the measures adopted to restore the financial stability of the entities, the regulation and supervision of the sector has been reinforced.
Regarding fiscal policy, the OECD considers that Spain has made a considerable effort to reduce the public deficit since 2012 and insists on the need to meet the objectives to reduce the high level of public debt. In addition to a new public administration reform program, the organization considers that the pension system reforms already adopted have reduced the sustainability risks of the system, but believes that additional measures are necessary. Regarding the tax system, the OECD supports recent measures in relation to excise taxes and recommends monitoring the impact on large companies of the recent corporate tax reform.
Regarding the labor market, the OECD points to the increase in inequality in income distribution and the poverty rate during the crisis as a consequence, above all, of high unemployment. It indicates that the poverty rate was reduced in 2014 and anticipates that the trend has continued, as a result of the improvement in labor market conditions. He considers that the Spanish tax and transfer system contributes to reducing poverty and inequality, although he asks for greater support for families with children. In this sense, the OECD proposes to strengthen social support systems and active employment policies with the idea of achieving the objectives, making more efficient spending and increasing their digitalization.
It values very positively the results of the labor reform of 2012 and stresses that it has contributed to stop the destruction of employment from 2013 and to improve the probability that temporary contracts, especially of young people, will become fixed. Temporality remains, however, high, there are deficiencies in training and a percentage greater than the EU's measure of low-paid jobs. In this regard, it is necessary to improve vocational training, especially dual training and seek greater convergence between the costs of dismissal of temporary and permanent.
The OECD points to a series of reforms that it considers necessary to guarantee sustainable economic growth in the medium term. Regulatory barriers that restrict competition have to be reduced (continue implementation of the Market Unity Law and liberalization of professional services). Also, to seek greater efficiency in the bankruptcy regime, whose operation has improved with the 2014 and 2015 reforms, but which could be completed with measures such as reducing the five-year term for debt exemption for operationally viable, but indebted, companies. Finally, the OECD believes that the innovation support system must be improved.
