“As vaccination advances and restrictions are progressively lifted, economic activity will recover strongly.” With this hopeful analysis, the Organization for Economic Cooperation and Development (OECD) designates Spain as the eurozone country that will experience the highest growth this year and even more in 2022.
In its outlook report, the Paris-based economic institution foresees that the Spanish gross domestic product will increase by 5.9% in 2021 and 6.3% in 2022 thanks to the progress of the vaccination campaign that will allow “to release the demand repressed ”and will facilitate“ the gradual recovery of tourism ”.
Starting in the second half of 2021, the economy will experience significant dynamism encouraged by the different measures of the national recovery plan. The easing of restrictions and uncertainty will translate into a drop in savings that will fuel consumption and a significant increase in investment.
However, the OECD warns of a “risk” factor in this idyllic recovery: “the increase in [corporate] insolvencies once government aid is eliminated”. Thus, the withdrawal of fiscal stimuli should, according to the report, be done “gradually” when the economy is on the path of stable growth.
Slow job recovery
The economic think tank places special emphasis on the situation of companies and the labor market. “If the crisis lasts longer than expected, it might be necessary to increase the amount of financing for this type of direct aid,” says the OECD, referring to direct aid aimed at protecting the business fabric which, in its opinion, should run ” quickly “.
Regarding employment, according to the agency’s estimates, its recovery will be slow: the unemployment rate, which reached 15.5% of the workforce in 2020, will only decrease by one tenth in 2021 and will stand at 14.7% in 2022.
The developed countries club advises “to maintain a flexible labor market that allows companies to adapt to possible structural adjustments after the pandemic” and to invest in vocational training to “improve the qualifications of workers and allow their” relocation to the sectors with better prospects ”.
The head of division in the OECD’s Department of Economics, Aída Caldera, questioned by the EFE agency, recalls that Spain registers one of the highest temporary employment rates in the EU, a negative factor for productivity since it encourages reduction investment and generates excessive mobility. Therefore, the economist advises “to clarify and limit the ways in which it can be hired temporarily.”
Along with unemployment, the rise in the level of debt appears as one of the main collateral effects of the health crisis with an increase of almost 25 points – up to 120% of GDP – in 2020, a figure considered “appropriate” by Aída Caldera for protect companies and workers from the social and economic consequences of the pandemic. The OECD predicts that with a public deficit of 8.6% this year, the debt will only decrease to 119% and with 5.4% in 2022 to 117.4%.
In this context, pension reform will play an essential role in avoiding a new rise in public debt. The economic body estimates that, without any modification, the debt would rise to 170% of GDP in 2050, the weight of pensions would go from 11% of current GDP to 15%.
The think tank proposes, for example, increasing the number of years of contributions that give the right to a full pension or linking the retirement age to the evolution of life expectancy. The reform must be consensual, the OECD estimates, to ensure its long-term sustainability.
According to OECD forecasts, among the main developed economies, only Canada (6.1%), the United States (6.9%) and the United Kingdom (7.2%) will outperform Spanish growth, the rebound of which is explained by the decline which suffered in 2020 , registering the largest drop among members of the single currency and even the entire OECD (-10.8%). At the European level, the Spanish economy will grow more than the German, which should increase by 3.3%, the French, with 5.8%, and the Italian, with 4.5%.
In 2022, the growth of the Spanish economy will continue its upward trend. The agency’s estimates place Spain as the growth leader in 2022 , ahead of the United Kingdom, Germany and Italy.