MADRID, 25 Oct. (EUROPA PRESS) –
The Organization for Economic Cooperation and Development (OECD) has revised its growth forecast for Spain in 2023 upwards by two tenths, which it estimates at 2.5%, although the ‘think-tank’ of advanced economies has revised It lowers its forecast by four tenths for 2024, when it anticipates a GDP expansion of 1.5%.
The new projections, included in the ‘Economic Study of Spain’, published this Wednesday by the OECD, point to a slowdown in the pace of expansion of the Spanish economy after two years of strong growth in 2021-2022, in the context of the post-Covid-19 recovery, although “it will remain sustained.”
In this sense, the Paris-based organization considers that although internal demand will moderate its pace, it will continue to be the main driver of growth for Spain, amid weakened external demand.
Likewise, GDP growth will benefit in the coming quarters from the important support of public spending linked to the Recovery, Transformation and Resilience Plan (PRTR), which channels European funds and which, according to the Government, together with the associated reforms, will promote GDP by 2.7 percentage points in 2023 and 3.1 percentage points in 2024.
However, the OECD warns that the outlook is clouded by significant uncertainties and downside risks, as a further escalation of geopolitical conflicts could drive up energy prices and inflation and worsen economic expectations for major players. Spain’s trading partners, while a slow implementation of the PRTR could slow growth more than expected.
Conversely, a faster-than-expected improvement in the international environment would support activity, as would faster and more efficient deployment of RTRP funds.
At the beginning of October, the International Monetary Fund (IMF) maintained its growth forecast for Spain in 2023 at 2.5%, while it revised its projection for 2024 downward by three tenths, to 1.7%.
Regarding the evolution of prices, the OECD highlights that inflation has moderated significantly in Spain, thanks to the fall in oil and gas prices, tax cuts and the implementation of the Iberian exception, although it warns of that pressures remain high on prices.
In this sense, it points out that the moderation in energy prices compared to 2022 has been greater than in other European economies; However, food and core inflation remain elevated. Likewise, the growth of nominal wages is contained below general inflation.
In this way, the OECD forecasts indicate that the inflation rate will close this year at 3.5%, in line with the previous projection, while in 2024 it will be 3.7%, three tenths more than what was previously anticipated.
Hand in hand with the economy, the Spanish labor market has recovered well from the Covid-19 pandemic, managing to reduce the unemployment rate below the pre-crisis level, with solid employment growth and reaching pre-pandemic levels in the total hours worked.
In its analysis, the OECD notes that the labor market recovery has been supported by measures such as the 2021 reform, whose preliminary evidence suggests significant results in reducing excessive dependence on temporary contracts.
Despite progress, challenges persist in the Spanish labor market, which continues to have the highest unemployment rate in the OECD, in addition to continuing to be especially difficult for young people and women.
Likewise, average incomes are low compared to other OECD countries, which for the ‘think-tank’ reflects low worker skills, but also weak business productivity.
“High unemployment largely reflects structural problems, including low incentives for the unemployed to return to work, skills mismatches and insufficiently effective active labor market policies,” notes the OECD, which anticipates a decline in the unemployment rate to 11 .9% this year and 11.5% the next.
Looking ahead, the OECD recommends that public policies should continue to address Spain’s persistent structural weaknesses, building on several reforms undertaken since 2021 such as the recent labor market reform, as well as several recent measures in terms of training contracts, policies active employment policies and hiring incentives that should also support employment.
Secondly, the organization warns that regional and income inequalities remain significant and poverty, despite having decreased recently, is comparatively high, especially among young people.
Likewise, it points out that Spain’s growth potential is low and is expected to remain so, especially given the rapid aging of the population, so the country will have to invest more to reverse this situation and will have to increase the total productivity of its factors, which is low compared to peer countries.
In this sense, it warns of the deterioration of public finances, with a public deficit estimated at 3.8% of GDP this year and 3.5% the next, while public debt is expected to exceed 109% in 2023 and by 110% next year, “reduces the room for maneuver for future public policies.”
On the other hand, remember that Spain will continue to benefit from the ‘Next Generation EU’ program, which foresees an investment of 77.2 billion euros between now and 2026, pointing out that continuing with a rapid and effective implementation of investments and reforms is essential to take advantage of ” this unique opportunity to transform and strengthen the Spanish economy and face the challenges that lie ahead.”
Among these great challenges facing Spain, the OECD cites climate change and other environmental issues, in particular the scarcity and quality of water, adding that the Climate Change and Energy Transition Law of 2021 sets the objective of water neutrality. carbon by 2050 and ambitious interim targets for 2030.
“Spain is well placed to face this challenge with significant technological capacity, the presence of leading companies and a consolidated value chain in key renewable energy sectors,” he concludes.
