Launch of the Economic Survey of Spain 2021, 27 May 2021

 

Remarks by Angel Gurría,

Secretary-General, OECD

Paris, 27 May 2021

Dear Vice President Calviño, representatives of the press:

It is a pleasure to be with you to present the OECD’s 2021 Economic Survey of Spain. I would like to thank Vice President Calviño for joining us today, and the Spanish authorities for their constant and very precious co-operation in the preparation of this Survey.

As elsewhere, the pandemic has hit Spain severely, with many lives lost and a significant strain on the health system. The economy has suffered tremendously, and notably the regions most reliant on tourism, which in Spain accounts for 12-13% of GDP and employment.

This has had a strong impact in terms of employment, especially on temporary workers, the youth and the self-employed. Social security registrations during the crisis have fallen mainly among temporary workers and workers under 25 years of age.

The good news is that the government reacted swiftly and with determination to address these challenges, implementing comprehensive measures to support companies and employment, such as temporary employment adjustment schemes, or ERTEs, which benefited more than 20% of wage earners at the worst moment of the crisis, or various measures to provide liquidity to companies. We are talking about social and economic measures amounting to around 20% of GDP (both in direct and indirect aid), supporting workers, vulnerable households and firms.

We are now beginning to see glimmers of hope.

With vaccination accelerating, we can expect the pandemic to become contained by the summer, provided all other measures to control the pandemic are maintained. The vaccination figures we have seen in recent weeks in Spain, at around half a million doses per day, are encouraging. Vaccination is currently the best and most effective economic policy.

Also, Spain will be one of the main beneficiaries of the European recovery funds. Only in grants, Spain will receive EUR 70 billion (5.8% of GDP) over 3 years . This is a huge figure which, if properly used, could be a real game changer, not only for helping economic activity to recover, but also for driving the transformation of the Spanish economy towards a more competitive, sustainable and inclusive model.

The government has recently sent to the European Commission its investment and reform objectives in the framework of its Recovery, Transformation and Resilience Plan. The Plan is ambitious and on track. It is truly encouraging to see that that together ecological transition and digital transformation represent close to 70% of the total investment, and that many reform proposals are in line with our analysis in today's Survey.

Coordination across different levels of government will be key to a successful implementation, together with a good governance system to strike the right balance between fast absorption and high accountability. The OECD stands ready to support the implementation of the plan, as we are doing with other EU countries.

Assuming the pandemic is being controlled progressively, we project a strong recovery of 5.9% and 6.3% GDP growth in 2021 and 2022, among the highest in the OECD, supported by pent-up demand, the national recovery plan and a gradual pick-up of tourism.

This does not mean that Spain will be out of the woods, though. A crisis such as the one we have gone through always leaves scars. It will be important not only to heal them, but also to ensure that some of the changes to the economy brought by the pandemic and the significant support coming from Europe become an opportunity for Spain to address some of its long lasting challenges, even prior to the pandemic.

Allow me to share the four main priorities highlighted in the Survey:

First, the country must continue to respond effectively to the pandemic until recovery is firmly underway, targeting the most affected households and businesses, and supporting vaccination efforts and health measures designed to contain the virus.

Second, we need policies kick-start recovery in an inclusive and sustainable manner, ensuring that it benefits all.

As in other countries, the distributional consequences of the pandemic will be considerable. Before the crisis, for example, the share of temporary workers and the rate of youth unemployment were among the highest in the OECD. In addition, training was low, especially among low-skilled workers. It will therefore be key to ensure that the people most impacted by the crisis - the unemployed, the temporary workers, the youth - are not left behind.

The effectiveness and intensity of active labour market policies needs to be improved in the short term by providing individualised support to job-seekers. We also recommend reducing the use of temporary contracts in the medium term, for example, by simplifying the menu of contracts and streamlining existing hiring incentives.

The Plan is also a huge opportunity to address the biggest inter-generational challenge ahead of us: climate change. The Plan's emphasis on fair ecological transition and the creation of green jobs is very welcome. Public support and training for workers will be important for this.

Third, once the recovery is firmly under way, it will be important to address medium-term fiscal challenges. Public debt to GDP increased, as it did in many OECD countries, to around 120% in 2020 This is compounded by population ageing. It is essential to ensure the long-term financial sustainability of the pension system. We recommend linking the retirement age to life expectancy and further increasing the effective retirement age by disincentivising early retirement and introducing new incentives to extend working lives.

And fourth, reforms are needed to boost productivity, to counter the scarring effects of the crisis on potential growth, and generate better-paid jobs. In past surveys, we have already highlighted the need for higher investment in innovation and skills, and more efficient resource allocation for productivity.

In this Survey, we highlight the opportunities that digitalisation offers to raise productivity growth and help businesses recover. Spain already has many plans to facilitate this process.

The Survey highlights two key channels to enhance digitalisation: address remaining gaps in digital infrastructure; and enhance capabilities of firms and people to take full advantage of digitalisation via higher investment in innovation and skills

Ladies and gentlemen,

Spain has made huge efforts to address and overcome the Covid-19 crisis. Our Survey considers that progress is being made in the right direction. It is very important that the fight to prevent the scarring effects of the pandemic is sustained and that, at the same time, this opportunity is used to advance the reforms and policies needed to build back better going forward.

The OECD stands ready to continue its work with and for Spain. We have full confidence in this country, in its government, in the strength and tenacity of its people, and we are confident that we will soon see a vigorous, inclusive and sustainable recovery. You can count on the OECD to deliver!

Thank you.

 

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