Spain will be, according to the OECD, the country in the euro zone with the highest growth this year and even more so in 2022, due to the double beneficial effect expected from the current rate of vaccination and the European funds that should start arriving in the next few months.
In its outlook report published this Monday, the Organization for Economic Cooperation and Development (OECD) estimates that the Spanish gross domestic product (GDP) will rise by 5.9% in 2021, which means two more tenths than I had anticipated in early March.
For next year, the revision is still much higher, from 1.5 points to 6.3%, because it will be then that the impact of vaccination will be fully felt in economic activity in sectors that have been closed by the pandemic like tourism, as well as European money.
One of the reasons for this very high rebound in growth is that the Spanish economy was also the one that suffered the biggest drop in 2020 of the members of the single currency and even of the entire OECD (-10.8%).
To the point that it will take three and a half years to recover the level of GDP per capita prior to the crisis. Only Iceland and Mexico, of the 38 Member States, will cost more.
Slow job recovery
The recovery in employment is going to be very slow. The OECD ventures that the unemployment rate, which rose to 15.5% on average last year, only it will decrease one tenth in 2021 and to 14.7% in 2022.
Aída Caldera, head of division in the OECD’s Department of Economics, explains to Efe that a part of the activity that usually generates the most employment, in particular services, continues to be touched, and that Spain is burdened by unemployment rates “structurally high “.
To face this problem, Caldera indicates that in the short term, active employment policies should be improved, with more personalized help to the unemployed to find a job with more training.
Spain also has one of the highest temporary employment rates in the EU and the OECD, 22%, and this is negative for productivity, it encourages investing less and generates excessive mobility. That is why the economist says that “it is necessary to clarify and limit the ways in which it is possible to contract temporarily.
Another major burden left by the crisis is the level of debt, which last year increased by almost 25 points of GDP, to 120%. An increase in spending that Caldera considers “appropriate” because without protecting companies and workers the economic and social consequences would have been worse.
The OECD predicts that with a public deficit of 8.6% this year, the debt will only decrease to 119.7% and with 5.4% in 2022 to 117.4%.
The withdrawal of fiscal stimuli will have to be done “gradually” and only when the economy is “on a more stable growth path” so as not to repeat the mistakes of a decade ago when austerity cut off the recovery, he recommends.
The debt will run rampant
To prevent public debt from running wild, pension reform is one of the key points. The organization has calculated that if nothing was done, debt would rise to 170% of GDP in 2050. The weight of pensions would go from 11% of current GDP to 15%.
Spain is one of the countries in which people retire earlier (at 62 years of age, instead of 65 on average in the OECD) and that is why the first proposal is to penalize those who do so early and give incentives to those who continue to work beyond the legal age.
For the OECD, the reform must be consensual so that what has already happened with the introduction of the sustainability factor by the Government of Mariano Rajoy, which was reversed.
And it insists that the number of years of contributions that give the right to a full pension must be increased and that the retirement age must be linked to the evolution of life expectancy, as countries such as countries have already done. Portugal or Denmark.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.