This Wednesday, the Organization for Economic Co-operation and Development (OECD) joined the cascade of praise that the Spanish economy has been receiving for months. “It has achieved exceptional results, registering GDP growth higher than that of other European countries and than most economic projections,” he points out in his report on Spain. The document, however, is intended more as a guide to action for the future than as a diagnosis of the current moment. And there, many of their demands conflict with government policies, especially regarding pensions and taxes.
Regarding the former, the organization warns that despite recent reforms, such as the increase in the legal retirement age, the extension of the contribution period, the intergenerational equity mechanism (MEI) and the reform of the special regime for the self-employed, the gap between pension expenditure and income is expected to increase in the coming decades. It therefore considers further measures necessary. Among these he mentions the introduction of an adjustment to life expectancy, the extension of the reference period for the calculation of pension rights or similar mechanisms. “For debt to follow a path of steady decline, it is necessary to address rising pension spending, reduce inefficient spending and improve tax collection,” he recommends.
He rejects, however, that the tax burden falls on labour, warning that new increases in social security contributions “could damage employment”. According to the OECD, the ratio of taxes to GDP paid in Spain in 2023 was 37.3%, higher than the average of 33.9% of the countries in the club of the richest economies on the planet. However, it collects less from consumption than its EU and OECD partners, which is why it believes it is necessary to implement comprehensive tax reform to rebalance payments and increase revenues. “Options include harmonizing VAT rates and reducing exemptions, equalizing excise duties on diesel and petrol and strengthening taxation on energy and vehicles, as well as reducing the tax wedge for low-income families,” he lists.
The demographic account overlooks the 132 pages of the text, where the OECD uses Airef calculations according to which spending on pensions will grow by 3.2 points of GDP between 2023 and 2050, and spending linked to aging will increase by 5.2 points. “Pension spending will increase, creating a growing volume of implicit liabilities that are currently not set aside. Indexing pensions to inflation and the lack of automatic adjustment for increased life expectancy increases the costs of the system,” he warns.
That said, there are calls to encourage older workers to stay employed and to expand adult education. “The employment rate of older workers has increased over the last two decades, but remains low. Their employment rate is below OECD levels and declines sharply after age 55 due to early retirement, skill obsolescence and limited job adaptability,” he explains.
It is also committed to improving the inclusion of immigrants in the labor market. If there is no change in trends, the arrival of foreigners will push the Spanish population beyond 50 million inhabitants in the second half of 2026. And there is room for improvements in areas such as the simplification of pre-arrival work visas, bilateral work agreements, the recognition of educational qualifications or the increase in staff to manage arrivals. Measures that “could attract more qualified immigrants and help alleviate the labor shortage”.
The body admits that Spain’s public finances have improved, with a decrease in accumulated debt since 2021, putting it at 101.8% at the end of 2024. However, this level is still high, and the OECD estimates that the growing pressure to spend more in the long term on issues such as defence, climate change and the aforementioned ageing, makes it necessary to have more fiscal space. “To address these pressures without compromising growth, it is essential to maintain credible fiscal policy over the medium term, while creating space for growth-enhancing spending, combined with policies that support potential growth.”
The moment of prosperity that the Spanish economy is experiencing, which is growing at a rate close to 3%, is in the view of the OECD in favor of restoring finances and making them ready to face future turbulences. “Given the strong growth momentum, accelerating the pace of deficit reduction would allow Spain to rebuild fiscal reserves more quickly to respond effectively to future crises or recessions,” he insists.
More construction
Beyond public finances, the report delves into issues such as the situation of the banking sector, “well capitalized and profitable despite the tightening of financial conditions”. Or the hottest political agenda, real estate. On this point, calls are made to increase the supply of affordable housing, to speed up urban development procedures and, ultimately, to invest more in social housing.
Furthermore, it addresses structural issues of the Spanish productive fabric, such as the situation of SMEs, which represent 99% of companies and employ the majority of the workforce, mainly in the service sector. The OECD complains that they tend to be “significantly less productive than large companies”. Its limited access to external finance and skilled labor, regulatory complexity, and lower adoption of advanced digital technologies are to blame. “Two-thirds of SMEs report having difficulty hiring workers with the right skills, while many lack the resources to develop and implement training strategies,” the report states.
