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The recovery is projected to remain robust in 2017 and 2018, although at a more moderate pace as the boost to private consumption provided by low oil prices and lower taxes eases. Growth will be driven by both domestic demand, supported by low interest rates and strong employment growth, and a positive external outlook. Inflation will remain subdued due to still high unemployment.
The fiscal stance will be broadly neutral over the projection period. Public debt relative to GDP has been slowly decreasing, but remains high. The government should stick to its medium-term consolidation path to ensure a gradually declining debt-to-GDP ratio. Structural reforms have contributed to improved competitiveness and strong employment growth, but more effective labour market policies and re-skilling are needed to further reduce unemployment.
Exports have risen from 25% of GDP in 2005 to 33% in 2016. Spain could reap further the benefits from globalisation and boost productivity by reducing regulatory barriers in product markets and encouraging higher investment in R&D and innovation. Decreasing labour market duality and strengthening skills by improving access to vocational education and training would help workers adapt to changing labour market needs due to globalisation and other factors.
Economic Survey of Spain (survey page)