The document provides an economic survey of Spain by the OECD. It summarizes that while growth has been robust, unemployment remains high. Productivity growth has stagnated and regional disparities exist. It provides recommendations to boost productivity, reduce inequality and regional disparities through measures like increasing spending on training, reducing barriers to entrepreneurship, strengthening innovation policies, and ensuring social benefits are portable across regions. Maintaining structural reforms, fiscal consolidation, and pension reforms are also recommended to ensure sustainable and inclusive growth.

1. 2018 OECD ECONOMIC
SURVEY OF SPAIN
Making growth work for all
22 November 2018, Madrid
@OECD
@OECDeconomy
http://www.oecd.org/eco/surveys/economic-survey-spain.htm

2. Growth has been robust
2
Source: OECD, Economic Outlook (database).
GDP growth, year-on-year % change
-6
-4
-2
0
2
4
6
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Spain Euro area

3. The economy is increasingly more open
3
Exports as a share of GDP
Source: OECD, Economic Outlook (database).
22
24
26
28
30
32
34
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

4. Employment has grown steadily
4
Source: OECD, Employment and Labour Force Statistics.
Employment rate
% of population (15-64 year-olds)
50
55
60
65
70
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

5. Unemployment is falling, but remains high
5
% of the labour force
1. As a percentage of 15-24 year-olds labour force.
Source: Eurostat and OECD.
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015 2016 2017
Unemployment Youth unemployment¹ Long-term unemployment

6. Non-performing loans have improved but remain
high
6
Ratio of NPLs to total loans
2018Q1 or latest
Source: IMF, Financial Soundness Indicators.
0
4
8
12
16
CAN
EST
GBR
CHE
SWE
AUS
LUX
USA
NOR
DEU
NLD
CZE
AUT
BEL
FRA
ISL
HUN
SVK
LVA
POL
ESP
IRL
PRT
ITA

7. Banks will need more capital
7
Regulatory Tier 1 capital to risk-weighted assets
2018Q1
Source: IMF, Financial Soundness Indicators.
0
5
10
15
20
25
30
EST
LUX
SWE
IRL
LVA
FIN
LTU
DNK
NLD
SVN
NOR
CZE
GBR
GRC
SVK
DEU
BEL
POL
HUN
CHE
AUT
FRA
PRT
ITA
USA
ESP

8. Public debt remains high
8
Source: OECD, Economic Outlook (database).
% of GDP
0
20
40
60
80
100
120
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

9. Population ageing will put pressure on pension
spending
9
Note: Based on implementation of both the 2011 and 2013 pension reforms and data from May 2018.
Source: The Ageing Report (European Commission, 2018).
Gross public pension spending
as a share of GDP
10
11
12
13
14
15
2016
2020
2024
2028
2032
2036
2040
2044
2048
2052
2056
2060

10. VAT tax revenue is low
10
Note: The VAT revenue ratio is the ratio of actual VAT collection to revenue that would be collected if
VAT was applied at the standard rate to the entire potential tax base and all revenue was collected.
Source: OECD (2018), Consumption Tax Trends 2018: VAT/GST and excise rates, trends and policy
issues.
VAT revenue ratio,%
2015
0
20
40
60
80
100
MEX
ITA
GRC
TUR
ESP
POL
GBR
BEL
CAN
IRL
FRA
NLD
PRT
AUS
SVK
LVA
ISL
FIN
OECD
DEU
NOR
DNK
SWE
CZE
AUT
SVN
HUN
ISR
KOR
CHL
CHE
JPN
EST
LUX
NZL

11. Public expenditures are highly decentralised
11
Source: OECD (2017), Government at a Glance 2017 (database).
0
20
40
60
80
100
DEU
BEL
ESP
CAN
FIN
NLD
ITA
DNK
POL
FRA
SWE
AUT
LUX
LVA
SVK
SVN
ISL
GRC
HUN
PRT
CZE
NOR
EST
GBR
IRL
Central government expenditure
as a share of total public expenditures

12. Main macroeconomic policy recommendations
1. Maintain momentum for structural reforms enhancing
productivity and job creation.
2. Stick to medium-term fiscal targets to ensure a durable
reduction of public debt.
3. As the recovery continues, set a more ambitious fiscal
consolidation path.
4. Further extend the pensionable earnings reference period
and the number of years of contributions required to gain a
full pension.
5. Abolish reduced value-added tax rates that are regressive.
6. Increase taxation of fuels to better reflect emissions of CO2
and other pollutants.
7. Make the expenditure rule the main rule for regions and
link it to the debt ratio targets.
12

13. Improving well-being and reducing
regional disparities
13

14. Income inequality is high
14
Source: OECD, Income Distribution and Poverty (database).
Gini coefficient after taxes and transfers
2015 or latest
0
0.1
0.2
0.3
0.4
0.5
MEX
CHL
TUR
USA
ISR
GBR
NZL
LVA
ESP
GRC
AUS
PRT
EST
JPN
ITA
CAN
OECD
NLD
IRL
CHE
FRA
KOR
POL
DEU
HUN
LUX
SWE
AUT
NOR
BEL
FIN
CZE
DNK
SVK
SVN
ISL

15. The rate of child poverty is high
15
%, 2015 or latest
Source: OECD, Income Distribution Database.
0
10
20
30
DNK
FIN
SVN
KOR
ISL
NOR
SWE
IRL
DEU
AUT
CHE
NLD
CZE
BEL
GBR
FRA
LUX
HUN
EST
LVA
AUS
OECD
POL
NZL
SVK
PRT
CAN
GRC
LTU
ITA
MEX
USA
CHL
ESP
TUR
ISR

16. Social expenditures are poorly targeted
16
Transfers received by working-age individuals
% of average cash transfer
Source: OECD, Social Expenditure Database.
0
20
40
60
80
100
120
140
160
180
Poorest 20% Richest 20%
Spain OECD

17. Regional dispersion of poverty rates is high
17
At-risk-of-poverty rate
2016
Source: Eurostat.
0
10
20
30
40
50
60
SVN NOR DNK NLD POL HUN SWE FIN CZE SVK GRC CHE ESP ITA
National average Region with lowest poverty rate Region with highest poverty rate

18. Unemployment rates differ across regions
18
Source: OECD, Labour and Regional Statistics.
% of the labour force
2017
0
5
10
15
20
25
30
OECD Region with lowest
unemployment
(Navarra)
Spain Region with highest
unemployment
(Extremadura)

19. Job market programmes are not concentrated in
training
19
Participants in active labour market programmes
% of the labour force, 2015
Source: OECD, Employment and Labour Market Statistics.
0
5
10
DEU CHE AUT NOR SVK FIN IRL NLD PRT POL BEL SWE DNK FRA HUN ESP LUX
Training Other active measures

20. Regional migration rates are low
20
Migration flows across regions
% of total population, 2013-16
Source: OECD (2018), Regions and Cities at a Glance (database).
0
1
2
3
4
5
ITA ESP PRT OECD DEU NLD GBR

21. Regional disparities in school drop-out rates are
high
21
2017
Note: % of the population aged 18-24 with at most lower secondary education and not in
further education or training.
Source: Eurostat.
0
5
10
15
20
25
30
Region with lowest
drop-out rate
(Basque Country)
European Union Spain Region with highest
drop-out rate
(Balearic Islands)

22. Participation in life-long learning by low-qualified
adults is relatively low
22
Participation by those with lower than secondary education
2017
Source: Eurostat.
0
5
10
15
20
25
GRC
POL
ITA
HUN
TUR
SVN
CZE
IRL
BEL
LVA
ESP
PRT
EU28
DEU
LUX
GBR
AUT
EST
FRA
NLD
CHE
ISL
NOR
FIN
DNK
SWE

23. Recommendations for reducing regional
disparities for inclusive growth
1. Increase spending on training and job-search assistance.
2. Remove barriers to competition of training centres across
regions.
3. Introduce a single point of contact for social and employment
services.
4. Ensure full portability of social and housing benefits across
regions, by providing temporary assistance either by the region
of origin or the central government.
5. Increase individualised support to students at the risk of failing
at an early stage.
6. Target existing financial incentives for lifelong learning
opportunities to low-qualified workers and link them to
individuals.
23

24. Boosting productivity and
internationalisation
24

25. Productivity growth has stagnated
25
Source: OECD, Productivity Database.
Multifactor productivity growth
95
100
105
110
115
120
2000 2003 2006 2009 2012 2015
Spain France United States

26. Labour productivity differs across regions
26
Note: Darker colours represent a higher level of labour productivity.
Source: OECD, Regional Statistics database.
Canary Islands

27. Export participation of SMEs remains relatively low
27
Source: OECD (2017), Entrepreneurship at a Glance.
0
10
20
30
40
50
EST
DEU
AUT
LUX
DNK
CAN
SVN
LVA
BEL
NLD
PRT
GBR
ITA
USA
ESP
POL
FIN
SWE
HUN
IRL
FRA
SVK
TUR
GRC
CZE
Share of exporting SMEs,
% of total enterprises, 2015

28. Barriers to entrepreneurship are high
28
Index scale of 0-6 from least to most restrictive, 2013
Source: OECD, Product Market Regulation Database.
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Barriers to entrepreneurship
- overall
Communication and simplification
of rules and procedures
Admin. burdens for corporations
Admin. burdens for sole proprietor firms
Barriers in services sector
Spain
OECD

29. Investment in knowledge-based capital is low
29
Investment in knowledge-based capital
% of business sector’s gross value added, 2015
Source: OECD (2017), Science, Technology and Industry Scoreboard 2017: The digital transformation.
0
10
20
30
GRC SVK ITA ESP NOR DEU PRT GBR AUT HUN DNK FIN NLD FRA USA SWE IRL
Other KBC assets including organisational capital and training
KBC assets in National Accounts including software and R&D

30. Spending on R&D is low
30
% of GDP
2016 or latest
Source: OECD (2018), OECD Main Science and Technology Indicators (database).
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
CHL
LVA
MEX
SVK
TUR
GRC
POL
IRL
ESP
HUN
LUX
PRT
NZL
EST
ITA
CAN
CZE
GBR
AUS
SVN
NLD
NOR
ISL
FRA
OECD
BEL
USA
FIN
DNK
DEU
AUT
JPN
SWE
CHE
KOR
ISR
Other sectors Business sector

31. Spanish firms lag in their use of key digital
technologies
31
Source: OECD (2017), OECD Digital Economy Outlook 2017.
Share of enterprises using cloud computing services
2016
0
20
40
60
FIN
SWE
JPN
ISL
DNK
NOR
IRL
GBR
NLD
CAN
BEL
AUS
OECD
ITA
LUX
ESP
CZE
PRT
SVK
FRA
AUT
DEU
KOR
HUN
GRC
LVA
POL

32. Recommendations for boosting productivity and
internationalisation
Boosting competition and reducing regulatory differences:
1. Eliminate the existing regulations that depend on the size of
firms, as needed.
2. Regions should include the principle of national effectiveness
of the Market Unity Law in their legislation.
3. Assess the compliance of new legislation at all levels of
government with the principles of the Market Unity Law.
Enhancing innovation:
4. Give the recently activated R&D Public Policy Network a strong
mandate to further increase coordination of regional and
national innovation policies.
5. Strengthen ex-post evaluation framework of innovation
support and consider increasing performance based funding. 32

33. 33
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