Spain's economy has performed strongly in recent years, expanding by a cumulative 10% since the fourth quarter of 2019 and significantly outperforming its European peers. This strong momentum provides a strong foundation for tackling longer-term challenges. Policy should focus on continuing structural reforms and securing fiscal sustainability to maintain growth and prepare for future shocks, according to a new OECD report.
The latest OECD Economic Survey of Spain says that GDP growth will remain robust at 2.9% in 2025 and gradually decelerate to 2.2% in 2026 and 1.8% in 2027. Consumer price inflation will continue to decline to 2.3% in 2026 and 1.8% in 2027, after 2.6% in 2025.
"Accelerating the pace of fiscal consolidation would help rebuild fiscal buffers to respond effectively to future shocks, including by addressing the rise in pension spending and optimising tax revenues," OECD Secretary-General Mathias Cormann said, presenting the Survey in Madrid alongside Spain's Minister of Economy, Trade and Business Carlos Cuerpo. "Strengthening productivity growth - especially among small and medium-sized enterprises - by improving their access to finance and by reducing administrative burdens will help Spain boost business dynamism and growth."
Reforming pensions, for example by introducing a life expectancy adjustment and extending the reference period for the calculation of pension rights, would help secure fiscal sustainability. Harmonising value-added tax rates and cutting exemptions would improve efficiency and raise revenues. Reducing labour income taxes for low-income earners could help strengthen work incentives.
Creating a more business-friendly environment for small and medium-sized firms would foster productivity gains and firm growth. This can be supported by improving access to finance, easing regulatory burdens and promoting innovation and skills investment. Simplifying access to public research and development support by streamlining application and reimbursement procedures, particularly for smaller firms, could unlock significant innovation potential among these firms.
Strengthening incentives for older workers to remain in employment will help address the challenges of an ageing population, including by reforming the non-contributory unemployment assistance system. Tailoring training to older workers' needs can further raise participation. In addition, improving the labour market performance of migrants, including by simplifying and accelerating the recognition of foreign qualifications, would expand labour supply and help meet future skills needs.
Climate change mitigation and adaptation efforts need to be maintained to meet emissions reduction targets and reduce climate-related risks. Priorities should include continuing to increase grid investment, improving water-use efficiency and facilitating further transport decarbonisation.
