Organization of developed countries This Wednesday, the OECD published a long list of economic policy recommendations for Spain. with the aim of improving the sustainability of public finances, potential GDP growth, sustainability of the pension system, labor market and youth employment.
The recommendation menu includes: VAT increase of approximately 5 billion dollars a net increase in taxes of approximately 6.8 billion, complete and rapid elimination of anti-inflation measures taken since mid-2021, ensuring moderate increases in the future interprofessional minimum wage (SMI) or the extension of the legal retirement age to beyond 67, following the Social Security reform that has raised eyebrows in the OECD. The international organization also advocates increasing the amount and scope of aid. minimum vital income (IMV) warns against the negative impact of imposing ceilings on housing rental prices in stressed areas.
Pensions under surveillance
In its biennial report on Spain, published this Wednesday, the organization that directs this organization Mathias Cormann He analyzes the pension system reform completed by Minister José Luis Escriva. Despite measures to raise incomes and encourage postponement of retirement age, OECD Increase in pensions according to CPI The larger increase in minimum and non-contributory pensions would lead to a “significant increase in pension expenditure”, which would only begin to decline in the late 1940s.
The OECD considers this to be preferable to guarantee the sustainability of the system. Extension of the legal retirement age in line with increasing life expectancy. At a press conference in Madrid, the OECD’s chief economist, Clare Lombardelli, bluntly explained that the international organisation’s recommendation for Spain was to extend the legal retirement age beyond the current age of 67.
If the measures taken by the government are not sufficient to guarantee the viability of the system, the organization recommends extending the current 25-year calculation period to at least 40 years and reducing the “accumulated growth rates of the pension amount”.
5 billion lira increase in VAT
international organization draws attention to the need for “one” financial consolidation Being “larger and more persistent” allows the debt to be kept on a downward trend and ensures that sufficient fiscal space is created to meet the spending demands arising from population aging and growth strategies. alcohol, tobacco and green taxation… He also advocates that anti-inflation measures and savings in public expenditures should not be extended until 2024, in line with the ‘spending review’ studies carried out by the Independent Fiscal Authority.
OECD particularly recommends Spain eliminate much of the discounted VAT This applies to an amount that the organization estimates at around €5,000 million for certain goods and services. It also raises increase consumption taxes further green taxation on alcohol and tobacco (1.3 billion) which should, above all, affect CO2 emissions (another 5 billion). The OECD, on the other hand, advocates the opposite approach. low wealth tax (1,500 million) and reduce taxes on low-income families with children (3,000 million). In summary, the tax measures proposed by the OECD for Spain include a tax increase of approximately 11 billion 300 million and a tax reduction of approximately 4 billion 500 million; This leaves the impact of further aggregation of the proposed measures at around 6 billion 800 million.
Overall, the OECD recommends that Spain increase indirect taxes and reduce social contributions and capital taxes.
Minimum Interprofessional Wage
Following a cumulative 47% increase in the minimum wage between 2018 and 2023, including a 22% increase in 2019, the OECD explains that various assessments suggest that this latest move has created an increase. you’re more likely to lose your job – especially among youth and women – and slowed job creation.
Although the organization acknowledged that the increase in 2019 also contributed to sales growthreduce wage inequality It recommends ending the increases – especially for workers under 30 and foreigners. The OECD recommends that “future changes to the minimum wage should be compatible with labor market conditions and productivity” and not follow a fixed target (60% of the average wage).
The economic report for Spain includes a large special section devoted to improving education, labor market and housing opportunities for young people. OECD underlines that the youth unemployment rate is 27%, one of the highest rates in developed countries, and draws attention to the poor quality of employment in this group, despite the improvements achieved thanks to labor reform. At this point, the international organization warns about the negative effects on access to housing of the Government’s decision to impose a cap on rental prices in distressed areas of cities; will reduce real estate supply hire.
Cutting Predictions for 2024
The OECD is taking advantage of the release of the report to correct its forecasts from just one month ago. The organization is now raising its GDP growth forecast for 2023 to 2.5% from 2.3%, putting it a tenth above the Government’s forecasts. However, the OECD cut its 2024 forecast from 1.9% to 1.5%, half a point below the Government’s forecast for next year.
However, OECD values The resilience of the economy and employment Despite the consequences of Russia’s war in Ukraine, he predicts a slowdown in Spain and for 2024, but he evaluates that “growth will remain resilient, supported by domestic demand and foreign trade flows.” New Generation EU European funds“.