You are in:

Economic Affairs, Employment and Social Security

Economic Policy

Sunday 31 December 2017

The Spanish economy is recovering the confidence of the international markets while acquiring efficiency, flexibility and the ability to compete. Furthermore, Spain is once again growing at rates that place it at the head of the main economies in the Economic and Monetary Union.

The Spanish economy has now enjoyed almost four straight years of growth, with a 0.9% rise in GDP in the second quarter and 3.1% over the last 12 months, according to the National Accounting figures published by the National Statistics Institute. This figure is one tenth up on both the quarterly and annual rates, thus maintaining the growth differential in favour of Spain compared with the Eurozone average.

Furthermore, this is balanced growth, with an improvement in the contribution from domestic demand, while maintaining the positive contribution from the foreign trade sector for the fifth straight quarter. Employment is growing at an annual rate of 2.8%, three tenths higher than in the first quarter, which amounts to the creation of 480,000 full-time equivalent jobs over the last year.

The Spanish economy recovered the level of revenue from before the crisis in the second quarter, that is, the maximum levels reached in the second quarter of 2008. In relation to the end of 2007, GDP is 1% higher, although it must still recover what is lost in growth during the five years the Spanish economy was in recession, of between a further 15% and 20%. The rate of 3.1% in the second quarter means this process is accelerating and will guarantee that the 3% forecast for the year as a whole will safely be met. Furthermore, Spain maintains its positive differential with the European Union and Eurozone averages, which have posted 2.3% and 2.2% growth in the second quarter, respectively.

The favourable price trend has allowed the Spanish economy to continue gaining in competitiveness. This is the fifth year in a row with a foreign trade surplus and the ability of the Spanish economy to receive financing exceeded 22.7 billion euros, according to National Accounting figures.

Spain has consolidated its position as an attractive economy for foreign investment. In 2016, productive foreign investment in gross terms exceeded 23 billion euros (23.48) in Spain, continuing the upward trend that began in 2013.

Credit is improving, companies have access to loans at better rates, households receive more financing and the cost of financing the public debt continues to fall.

Development of National Reform Programme

The 2017 National Reform Programme firstly takes account of the measures adopted to meet the commitments taken on by Spain within the framework of the European Semester and the goals contained in the Europe 2020 Strategy. Given the situation under a caretaker government in 2016, the reforms undertaken were limited. At any event, the 2017 National Programme contains the progress made in different areas, above all in taxation. As regards the additional reforms, they are structured into three main blocks: structural reforms at a national level, fiscal consolidation and the European agenda.

National Reforms

National reforms are aimed at extending the progress made in recent years and at implementing second generation reforms designed to guarantee the scope of growth and job creation, in other words, that this growth filters down to all citizens and is sustainable in the medium and long term.

There are six main areas of action:

  • Job creation and social inclusion: One of the priority goals is to consolidate the job creation trend, and make it more inclusive and better quality. There are noteworthy measures aimed at ensuring greater efficiency in active employment policies and in training, particularly of young people and the long-term unemployed: the renewal of the 2017-2020 Spanish Job Activation Strategy, a new 2017-2020 Youth Entrepreneurship and Employment Strategy and improvements in the Regime for the Self-Employed based on a new Urgent Reform Law for Self-Employed Work.
  • On another note, in order to combat poverty and social exclusion, the most effective instruments are reforms that lead to more individuals joining the labour market. In addition, specific multiannual social programmes will continue to be developed, such as the National Strategy to Prevent and Combat Poverty and Social Exclusion, and the 2016-2020 Social Inclusion Plan.
  • Goods and services markets: In 2017, one of the main areas of action, as a catalyst for economic activity, is contained in the Law to Guarantee Market Unity. Further progress will also be made in increasing the powers and effective functioning of the markets, particularly those that supply input and essential services to our companies, such as energy, infrastructure, the digital agenda, tourism and the financial sector.
  • Backing for entrepreneurial initiatives and business development: the aim is to improve the environment in which business investment is developed and continue with providing support for entrepreneurs, boosting stimuli for entrepreneurship so that it costs less to embark on an economic activity and so that it becomes easier to maintain it and extend it. Some of the noteworthy measures planned are the Urgent Reform Law for Self-Employed Work, the Strategy to Eliminate Business Thresholds and the 2017-2027 Strategy to Internationalise the Spanish Economy.
  • Sustainable growth: R&D+i and the environment. Measures are contained in this area that involve all stakeholders, boost social and economic returns from investment in R&D+i and allow the sources of national and European financing to be optimised. As regards the environment, the government's priority is to define a framework in the medium and long term to guarantee the orderly transformation of our economy towards a low carbon economy. Work will continue to be done on three fronts: reducing emissions, improving energy efficiency and the participation of renewable energies. Noteworthy among the main measures are the Law on Climate Change and Energy Transition, the National Integrated Energy and Climate Plan and the actions within the framework of the National Energy Efficiency Fund.
  • Efficiency of the public authorities: Measures will be adopted in three main areas: the reform and modernisation of the public authorities and their relations with individuals and companies, improved recruitment processes and improvements in the State's regulatory production activity.

Reforms are planned with long-term economic effects but which must start to be implemented now. To achieve this, it is necessary to reach agreements with other political forces that provide for regulatory stability. The most important reforms affect the education model, the systems of regional and local financing and a joint reflection on the sustainability of the public pension system

Fiscal Consolidation

Budget stability will continue to be an inescapable commitment. This heading includes actions in two areas: budget stability for 2017 to ensure the deficit target of 3.1% of GDP is reached this year and to ensure it stands below 3% (2.2%) in 2018; and the fight against tax fraud, particularly by stepping up actions at a national and international level and enhancing actions through international forums such as the IMF, the OECD, aimed at combating fraud and tax evasion.

European Agenda

At a European level, the Government of Spain will continue to work to consolidate the European integration project that complements the reform agenda at a domestic level. To achieve that, the priorities identified in Bratislava and reiterated in the Declaration of Rome will be taken up and actively promoted. These include the internal market, investment and the social dimension, the Welfare State, growth and employment, and an open trade policy based on rules. Furthermore, greater integration will be sought through extending the Economic and Monetary Union such that the efficient functioning of the Euro is guaranteed and that the benefits deriving therefrom filter down to all citizens.