The OECD has revised upward its forecast for Spanish economic growth

Paris (EFE) – The OECD has revised upward its forecast for Spain’s economic growth this year to 1.8%, one tenth more than expected in February and four more than in November, but warning of a high level public debt, in which pensions will weigh more and more with the latest reform.

In the semi-annual Outlook report, which the Organization for Economic Co-operation and Development (OECD) publishes this Thursday, Spain again distances itself from other major European economies, which have experienced near-stagnation since the Russian invasion of Ukraine in February 2022. , and for which a more than timid recovery is expected in 2024 and 2025.

Spain, which led the eurozone with GDP growth of 2.5% last year, will grow by more than double in 2024 compared with the 0.7% expected for all members of the single currency. And the same will happen compared to France (0.7%) and Italy (0.7%), not to mention Germany (0.2%).

That 1.8% is very close to the 1.7% the European Commission predicted for Spain in mid-February, but it is less optimistic than the government, which hopes to reach 2% in forecasts it has just sent to Brussels.

For 2025, the OECD has not changed its forecast of 2%, which practically coincides with the forecasts of most economic organizations.

Employment and purchasing power are pulling the cart

The Spanish analysis highlights private consumption as one of the main vectors of activity, with growth expected to be 2% this year and 2.1% next year thanks to the strength of the labor market (the unemployment rate should fall from the average level). from 12.1% in 2023 to 11.7% in 2024 and 11.3% in 2025), as well as an increase in purchasing power.

This increase will be possible largely due to lower inflation, which should fall from 3.4% in 2023 to 3% this year and 2.3% next year.

The other side of the coin is investment, which, like last year, is in decline and will grow by only 0.7% in 2024 before recovering by 3% in 2025. Something similar can be said about foreign trade, which subtracts two-tenths of GDP this year and will have zero impact next year.

The OECD is warning Spain (addressed to a large proportion of its member countries) about a debt weight it considers “high”: 107.7% in 2023, which it estimates will fall by one point to 106.7% in 2025.

Increased pension costs to the detriment of economic growth

The specific problem the OECD points out to Spain is the rising costs of pensions, a clear reference to minister José Luis Escrivá’s reforms, which he has criticized in the past, “to the detriment of items that contribute to economic growth.”

That’s why he says a fiscal adjustment is needed in the medium term to “keep debt on a downward path, comply with EU fiscal rules and create space for spending on future priorities.”

In fact, in the short term it is not as optimistic as the government, which in its forecasts to Brussels promises that the deficit will rise from 3.6% of GDP in 2023 to 3% this year and 2.5% next year. The OECD will remain at 3.3% in 2024 and 2.6% in 2025.

The adjustment he recommends would come first through more selective energy price relief measures, targeting the most vulnerable.

Including through a gradual expansion of the VAT base (that is, a reduction in the reduced rate for many goods and services), as well as an increase in environmental taxes.

In parallel, the so-called “club of developed countries” recommends measures for sustainable growth, along with increased productivity through innovation, improved education and skills of workers, and active employment policies to adapt the workforce to needs. market.