OECD Economic Surveys: Spain 2021 - Presentation

2021 OECD ECONOMIC SURVEY OF SPAIN

Fostering the recovery 27 May 2021

@OECD

@OECDeconomy

www.oecd.org/economy/spain-economic-snapshot/

Key messages COVID-19 hit Spain hard, but economic policies reacted swiftly.

Fiscal policy needs to remain supportive, as long as the economy remains vulnerable.

• Target short-term support on the most affected households, workers, and firms

Well-functioning labour markets are key to a durable and inclusive recovery.

• Improve job quality via lower share of temporary contracts, better skills and enhanced support for job seekers

Accelerating the digital transformation will help boost productivity growth.

• Reduce barriers to technology adoption and use • Boost digital skills and innovation

2

Mitigating the effects of the pandemic

3

The COVID-19 crisis has hit Spain hard Real GDP 2019Q4=100

105 100 95 90 85

May 2021 projections December 2019 projections

80 75

2019Q4

2020Q2

2020Q4

2021Q2

2021Q4

Source: OECD Economic Outlook: Statistics and Projections (database).

2022Q2

2022Q4 4

Job losses were concentrated on young and temporary workers Social security affiliations December 2019=100

110 Total employment Employment under temporary contract Employment of workers under 25

105 100 95 90 85

Source: Ministry of Inclusion, Social Security, and Migration.

Apr-21

Feb-21

Dec-20

Oct-20

Aug-20

Jun-20

Apr-20

Feb-20

75

Dec-19

80

5

Fiscal support has been significant General government fiscal balance % of GDP

4 2 0 -2 -4 -6 -8 -10

Source: OECD Economic Outlook: Statistics and Projections (database).

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

-14

2004

-12

6

Short-time work schemes were widely used Workers on short-time work schemes At the end of the month, in thousands, 2020-21

4000 3500 3000 2500 2000 1500 1000

Source: Ministry of Inclusion, Social Security, and Migration.

April

March

February

January

December

November

October

September

August

July

June

May

0

April

500

7

The take-up of public loan guarantees has been significant COVID-19 guarantee lines By sector, in billion euros, March 2021

60 50 40 30 20

Source: Ministry of Economic Affairs and Digital Transformation.

Accommodation and food

Industry

Professional and scientific activities

Construction

Agriculture

Arts & recreation

Admin., Education and Health

ICT

Real estate activities

0

Financial activities

10

8

The recovery is gathering pace Annual percentage change 2019

2020

2021

2022

Gross domestic product

2.0

-10.8

5.9

6.3

Unemployment rate (%)

14.1

15.5

15.4

14.7

Fiscal balance (% of GDP)

-2.9

-11.0

-8.6

-5.4

Public debt (Maastricht, % of GDP)

95.5

120.0

119.7

117.4

Source: OECD Economic Outlook : Statistics and Projections (database).

9

Main recommendations for mitigating the effects of the pandemic • Keep fiscal policy supportive until the recovery is firmly underway, while making support measures more targeted.

• Ensure that workers on short-time work schemes, effectively use their priority for training.

• Maintain a flexible labour market that allows firms to adapt to changing economic conditions, including through the priority of firm level agreements.

• Ensure the swift disbursement of the new direct aid measures and increase the allocated funds, if needed.

10

Promoting an inclusive and sustainable recovery

11

EU funds are sizeable and should be spent wisely Allocations per country in million euros, 2018 prices

80000 70000

Recovery and Resilience Facility

REACT-EU

60000 50000 40000 30000 20000 10000 0

DEU

Source: European Commission.

FRA

ESP

ITA 12

Congested courts can delay the speedy restructuring of viable firms Average time needed to resolve civil and commercial cases First instance, in days, 2018

600 500 400 300 200 100 0

LTU LUX NLD AUT EST CZE HUN SVK SWEDNK DEU PRT LVA POL FIN SVN ESP FRA ITA GRC

Source: EU Justice Scoreboard 2020 (database).

13

Training the unemployed will be key Spending on training

As a % of total active labour market policies spending 70 60 50 40 30 20

0

POL AUS HUN JPN SWE NLD SVK ESP EST BEL DNK SVN OECD LUX ITA DEU CHE KOR CAN USA FRA IRL LVA FIN PRT AUT NZL

10

Source: OECD, Statistics on Labour Market Programmes (database).

14

The labour market is highly dual Temporary contracts

% of dependent employment, 2019 60

Spain

EU28

50 40 30 20 10 0

Temporary contracts among low-educated

Temporary contracts among youth

Note: Low-educated refers to 20-64 year olds with less than primary, primary and lower secondary educational attainment (ISCED levels 0-2) and youth refers to 15-29 year olds.

Source: Eurostat.

15

Minimum wages have risen Ratio of minimum to median wage 100 90 80 70 60 50 40 30 20 10 0

USA ESP (2018) IRL CZE EST JPN GRC MEX BEL LVA NLD DEU ESP (2019) HUN LTU CAN POL AUS OECD LUX SVK GBR ISR PRT FRA KOR SVN NZL CHL TUR COL

2019

Source: OECD Labour Market Statistics.

16

Main recommendations to promote an inclusive and sustainable recovery • Prioritise reforms that enhance long-term growth and ensure a swift implementation of the recovery plan.

• Ensure efficient coordination, governance and evaluation of the recovery plan.

• Promote out-of-court restructuring proceedings, especially for small and medium sized enterprises.

• Introduce the use of profiling tools to identify job-seekers at risk of becoming long-term unemployed and their training needs.

• Target existing hiring incentives to vulnerable groups and link them to training programmes.

• Simplify the menu of contracts firms can choose from.

• Establish a permanent Commission to regularly evaluate the changes to the minimum wage, in line with changing labour market conditions and productivity.

17

Addressing medium-term fiscal challenges

18

The pandemic has increased public debt Illustrative simulations of gross government debt % of GDP, Maastricht definition 180 160 140 120 100 80

Scenario offsetting ageing-related spending

60

Scenario not offsetting ageing-related spending

40

Scenario 1: Higher GDP growth

20 0

Scenario 2: Higher interest rates 2006

2011

2016

2021

2026

2031

2036

2041

2046

Source: Adapted from OECD Economic Outlook: Statistics and Projections (database); and Longterm baseline projections; European Commission (2018), The 2018 Ageing Report.

19

Population ageing is a key challenge Old-age dependency ratio

Number of people older than 65 years per 100 people of working-age (20-64) 90 80

2050

2020

70 60 50 40 30 20 0

NOR LUX SWE ISL GBR IRL BEL FIN HUN LVA NLD OECD CHE FRA SVK EST LTU CZE AUT DEU POL SVN PRT ITA GRC ESP KOR JPN

10

Source: OECD (2019), Pensions at a Glance 2019.

20

The actual retirement age is low Average effective age of labour market exit Men and women, 2013-2018

75 70 65 60

50

SVK FRA GRC LUX BEL SVN ESP AUT ITA DNK DEU FIN NLD GBR OECD CAN AUS IRL NOR SWE PRT USA ISR NZL CHL MEX JPN KOR

55

Source: OECD (2019), Pensions at a Glance 2019.

21

Revenues from value-added and environmental taxes could be increased Taxes

% of GDP, 2019 8 7

Spain

6

EU27

5 4 3 2 1 0

Value-added tax

Source: Eurostat, Tax Revenue Statistics.

Environmental taxes 22

Main recommendations for addressing medium-term fiscal challenges • When the recovery is firmly underway, announce a multi-year path for fiscal consolidation strategy, which includes all levels of government.

• Increase systemic evaluation of policies at every level of government.

• Take adequate and socially acceptable measures to ensure the long-term financial sustainability of the pension system.

• Link the statutory retirement age to life expectancy at retirement and disincentivise early retirement.

• Over the medium term, increase taxation of fuels to better reflect emissions of CO2, together with redistribution towards poorer households.

23

Boosting digitalisation

24

Productivity growth is low Multifactor productivity growth 2000 = 100

120

Germany

Spain

France

United States

115 110 105 100 95

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Source: OECD Productivity database.

25

Communication infrastructure is well developed Fixed broadband subscriptions per 100 inhabitants by technology, 2019

50 45

Total fixed broadband

of which fibre

40 35 30 25 20 15 10 0

MEX TUR CHL POL LVA ISR AUT ITA IRL OECD JPN FIN ESP AUS USA NZL PRT GRC SWE BEL GBR CAN DEU KOR NOR NLD DNK FRA

5

Source: OECD Broadband Database.

26

High-speed broadband access is low in rural areas Households in rural areas where high-speed broadband access is available Percentage of total households, 2017

100 90 80 70 60 50 40 30 20 0

FIN SWE FRA ESP EST ITA LTU NOR POL SVK AUT HUN DEU SVN CZE CAN DNK USA LVA PRT IRL GBR BEL CHE ISL LUX NLD

10

Source: OECD (2019), Measuring the Digital Transformation.

27

E-government is well developed Digital Economy and Society Index

100

Digital Public Services, score from 0 to 100, 2020

80 60 40

0

GRC SVK HUN CZE DEU POL ITA SVN GBR BEL EU LUX PRT FRA SWE IRL AUT NLD LTU LVA FIN DNK ESP EST

20

Source: European Commission, Digital Economy and Society Index Report 2020.

28

There is room to raise firms’ adoption of digital technologies Percentage of firms which adopt each technology 2019

80

Spain

70

Best performing country

60 50 40 30 20 10 0

E-purchases

E-sales

Cloud computing

Source: OECD, ICT Access and Usage by Businesses (database).

Enterprise resource planning

Customer relationship management

29

There are too few innovative firms Innovative firms

NOR

BEL

PRT

FIN

LUX

DEU

AUT

NLD

GRC

FRA

IRL

ISL

SWE

ITA

LTU

EST

CZE

SVN

ESP

SVK

LVA

HUN

100 90 80 70 60 50 40 30 20 10 0

POL

As a percentage of total firms

Note: “Innovative firms” are those which introduced at least one of the following 4 types of innovation: product, business process, business organisation and marketing during the period 2014-16.

Source: OECD, Innovation Indicators.

30

Digital skills should be improved Basic digital skills

Percentage of respondents (25-64 year olds) claiming to have basic digital skills, 2019 100 90 80 70 60 50 40 30 20 0

TUR ITA LVA POL GRC HUN PRT IRL SVK FRA LTU SVN EU27 ESP BEL EST LUX CZE AUT DNK DEU GBR SWE CHE NLD FIN NOR ISL

10

Source: Eurostat, Digital Skills.

31

Recommendations to boost digitalisation • Continue to reduce excessive regulatory burdens to develop communication infrastructure, while reducing regulatory differences across regions.

• Fully roll out the National Plan for Digitalisation of Public Administration.

• Strengthen Technology Centres’ capacity to effectively conduct R&D through partnerships between firms, especially SMEs, and research institutes.

• Shift job training subsidies to individuals at least partially, or develop public job training programmes targeted to low-skilled and older workers for ICT skills.

32

For more information

@OECD @OECDeconomy

www.oecd.org/economy/spain-economic-snapshot/

33