The OECD has revised down to 1.4% its economic growth forecast for Spain in 2024, a figure well below the 2% expected by the government. In its half-yearly Outlook report published on Wednesday, the Organisation for Economic Co-operation and Development (OECD) sends a clear message to Pedro Sánchez’s new government: further budgetary adjustment is needed to keep public debt under control.
The report stresses that “stronger and sustained fiscal consolidation is needed to keep debt on a downward path and create room for growth-friendly spending”.
On the one hand, they warn that population ageing will lead to higher public spending, some 2.7 GDP points more between 2024 and 2040.
Moreover, the OECD does not quite believe the government’s planned cut in the public deficit, which it has calculated will fall from 3.9% of GDP this year to 3% in 2024 and 2.7% in 2025.
Instead, it estimates that after 3.6 per cent in 2023, it will be 3.2 per cent in 2024 and 3.1 per cent in 2025.
There are other recommendations for Spain in this study that are already commonplace, such as stimulating research and development (R&D) projects through partnerships between companies and research centres, or reducing regulatory differences between autonomous communities, in the interests of greater productivity and competitiveness.
It is also important to improve qualifications and educational results, especially for young people, which would improve their employment prospects; to implement more efficient active labour market policies; and to have a tax system that is more oriented towards environmental objectives, with taxes that are more environmentally friendly.