A presentation of the main findings and recommendations of the OECD Economic Survey of Spain 2014 launched 8 September 2014 in Madrid, Spain. Structural reforms (labour market, banking, fiscal) have put the economy on the road to recovery.

1. 2014 OECD ECONOMIC
SURVEY OF SPAIN
ON THE ROAD TO RECOVERY
8 September 2014, Madrid, Spain
www.oecd.org/eco/surveys/economic-survey-spain.htm

2. Main Findings
Structural reforms (labour market, banking, fiscal) have put the economy
on the road to recovery.
1. Reforms have improved labour market performance even though
unemployment rate is still too high.
2. Innovation, especially by business is too low, and talent is under-utilised.
3. In spite of recent competitiveness gains, barriers to entrepreneurship
remain high.
4. The banking sector has improved but credit is too low and firms need
access to other sources of financing.

3. Key Recommendations
1. Strengthen job search assistance and vocational training and improve
the tax mix.
2. Raise living standards by increasing innovation and enhancing skills.
3. Streamline regulations and reduce barriers to start and grow firms.
4. Improve insolvency procedures and promote diversified financing
sources.

4. Reforms are paying off
• GDP growth has resumed
• The unemployment rate has
started to fall
• Unit labour costs have fallen
improving competitiveness
• Exports have led the recovery
• The current account has
improved
1. Real house prices seasonally adjusted. The peak occurs in Q1 2007 for Ireland, Q3 2007 for
Spain and Q4 2006 for the United States.
Source: OECD (2014), OECD Economic Outlook: Statistics and Projections (database) and
Housing Prices Database.
2001 = 100
125
120
115
110
105
100
Peak = 100
110
100
90
80
70
60
50
40
30
2001 = 100
115
110
105
100
95
90
85
80
75
70
Spain Germany
A. Gross domestic product
Volume
E. Export performance
Ratio of export volumes to export markets
2001 2003 2005 2007 2009 2011 2013
Per cent
30
25
20
15
10
5
2001 = 100
135
130
125
120
115
110
105
100
95
France Portugal
B. Unemployment rate
D. Unit labour cost
Total economy
2001 2003 2005 2007 2009 2011 2013
20
-64 -56 -48 -40 -32 -24 -16 -8 0 8 16 24
Quarters from peak
C. House prices1
Spain
Ireland
United States
95
2001 2003 2005 2007 2009 2011 2013
0
2001 2003 2005 2007 2009 2011 2013
% of GDP
10
5
0
-5
-10
-15
F. Current account balance
2001 2003 2005 2007 2009 2011 2013

5. Debts are still high
• The budget situation has improved, but public debt is still high and rising.
• Private debt is falling. Firms face difficulties to obtain financing.
160
140
120
100
80
60
Spain Germany France
A. Household debt2
% of gross disposable income
240
220
200
180
160
140
120
100
Italy Portugal
B. Debt of non-financial corporations
% of GDP
1. Debt is calculated as the sum of the following liability categories, whenever available/applicable: currency and deposits, securities other than shares (except financial derivatives),
loans, insurance technical reserves and other accounts payable.
2. Including non-profit institutions serving households.
Source: OECD (2014), “Financial Dashboard”, OECD National Accounts Statistics (database), July.
1 http://dx.doi.org/10.1787/888933127947
40
1999 2001 2003 2005 2007 2009 2011 2013
80
1999 2001 2003 2005 2007 2009 2011 2013

6. Fiscal transparency is increasing
Contingent Liabilities
Source: Government of Spain (2013), Actualización del Programa de Estabilidad 2014-2017 (Stability Programme
Update).
For example,
there is more
information
available today
about the full
extent of public
debt.

7. The labour market has started to improve
• Spain’s unemployment (24.5%) and
youth unemployment rate (55%) are
high but are starting to fall; Long-term
unemployment is also high.
• Many unemployed are ill-equipped
to benefit from the recovery and are
vulnerable to becoming permanently
unemployed
Per cent
30
25
20
15
10
5
0
Spain OECD Euro area
A. Unemployment rate
2003 2005 2007 2009 2011 2013
75
70
65
60
55
B. Employment rate
2003 2005 2007 2009 2011 2013
60
50
40
30
20
10
0
D. Youth unemployment rate (age 15-24)
2003 2005 2007 2009 2011 2013
70
60
50
40
30
20
10
0
C. Incidence of long-term unemployment1
2003 2005 2007 2009 2011 2013
1. Persons unemployed for more than one year as a percentage of total unemployed..
Source: OECD (2014), OECD Economic Outlook: Statistics and Projections and OECD Employment and Labour Market Statistics (databases), and OECD Short-
Term Labour Market Statistics Database.

8. The recession has raised inequality and
poverty
Spain had the 2nd
highest rise in
inequality in Europe
from 2007 to 2012…
…and one of the
highest increases in
relative poverty
1. The Gini coefficient of household income has a range from zero
(when everybody has identical incomes) to one (when all income
goes to only one person). Increasing values of the Gini coefficient
thus indicate higher inequality in the distribution of income. 2008-12
for France, 2007-11 for Austria and United Kingdom.
2. Relative income poverty is the share of people living with less than
50% of the median equivalised household disposable income.
Source: Eurostat (2014), “Income Distribution and Monetary Poverty”,
Eurostat Database and OECD (2014), OECD Income Distribution
Database.
0.04
0.03
0.02
0.01
0.00
-0.01
-0.02
-0.03
-0.04
ISL
PRT
NLD
DEU
CHE
IRL
POL
NOR
EST
CZE
ITA
FIN
GRC
EU27
AUT
BEL
GBR
SVN
LUX
FRA
SVK
HUN
SWE
DNK
ESP
A. Change in inequality between 2007 and 2012, % points1
4
3
2
1
0
-1
-2
-3
B. Change in the relative poverty threshold between 2007 and 2011, % points2
EST
PRT
GBR
CHL
NZL
FIN
AUS
ISL
KOR
USA
DNK
NOR
IRL
OECD
JPN
DEU
CAN
CZE
MEX
BEL
ITA
SVN
FRA
ISR
LUX
POL
NLD
GRC
SWE
SVK
ESP
AUT
TUR
HUN

9. Labour market activation policies and training
2.5
2.0
1.5
1.0
0.5
2007² 2012³
3.0
2.5
2.0
1.5
1.0
0.5
1. Active measures in Panel A cover public employment services and administration, training, employment incentives, supported employment and rehabilitation, direct job
creation and start-up incentives. Passive measures in Panel B cover out-of-work income maintenance and support, and early retirement.
2. 2008 for Chile in Panel A.
3. 2011 for Australia, Ireland, Israel, Luxembourg, Poland and Spain; 2009 for the United Kingdom in Panel A; 2010 for Greece and the United Kingdom in Panel B.
Source: OECD (2014), OECD Employment Outlook 2014.
Training needs are high.
Around half the
unemployed have lower
secondary education or
less.
Unemployment more
than doubled since 2007
but spending on job
search and training only
rose 10%. Public
spending is skewed
towards income support
measures.
1 http://dx.doi.org/10.1787/888933128612
Public expenditure, % of GDP1
0.0
MEX
CHL
USA
ISR
JPN
CAN
SVK
CZE
SVN
NZL
EST
AUS
KOR
POL
GBR
ITA
PRT
NOR
OECD
CHE
LUX
DEU
HUN
AUT
BEL
ESP
FRA
IRL
NLD
FIN
SWE
DNK
A. Public employment services and training
0.0
MEX
CHL
CZE
KOR
GBR
POL
JPN
NOR
NZL
USA
HUN
SVK
EST
AUS
ISR
CHE
CAN
LUX
SWE
GRC
SVN
OECD
DEU
AUT
FRA
FIN
ITA
PRT
DNK
NLD
BEL
IRL
ESP
B. Income support

10. Innovation needs boosting
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
A. Total research and development
expenditure
Per cent of GDP
2012 2000¹
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
B. Business enterprise research and
development expenditure
Per cent of GDP
2012 2000¹
1 200
1 000
800
600
400
200
C. Number of science and engineering
articles
Per million population
2011 2000
80
70
60
50
40
30
20
10
D. Number of patents2
Per million population
Average 2010-12 Average 2000-02
1. 2001 for Sweden.
2. Triadic patents, i.e. those filed at the both the European and Japanese Patent Offices, and granted by the US Patent and Trademark Office.
Source: OECD (2014), OECD Science, Technology and R&D Statistics (database), July and NSF (2014), Science and Engineering Indicators 2014, National Science
Foundation.
1 http://dx.doi.org/10.1787/888933128403
Overall spending on
R&D is low due to low
spending by business,
especially large firms.
The impact of innovation
on the economy as
measured by patents and
other outputs is also
relatively low.
0.0
ESP GBR FRA OECD USA DEU SWE
0.0
ESP GBR FRA OECD USA DEU SWE
0
FRA ESP OECD DEU USA GBR SWE
0
ESP GBR FRA OECD USA DEU SWE

11. Education and skills need to be better utilised
30
25
20
15
10
5
Highest educational atttainment
Per cent of population, 2012
Lower secondary Upper secondary Tertiary
Age 25-34 36 25 39
Age 55-64 65 16 19
Share of tertiary graduates in less-skilled occupations1
Per cent of employees, age 15-64 , 2013
1. Share of employees with a first and second stage of tertiary education (levels 5 and 6 of ISCED, the international standard classification of education) in non-managerial, non-professional,
non-technical occupations (levels 4-9 of ISCO, the international standard classification of occupations).
Source: Eurostat (2014), "Population and Social Conditions", Eurostat Database, July.
1 http://dx.doi.org/10.1787/888933128555
The share of the
population gaining
tertiary qualifications
has increased
significantly…
… but many graduates
work in less-skilled jobs
Source: OECD (2014), Education at a Glance 2014: OECD Indicators.
0
CZE
PRT
HUN
LUX
ITA
SVK
AUT
SVN
ISL
DNK
DEU
NLD
POL
NOR
TUR
SWE
EU28
CHE
FRA
FIN
BEL
GRC
EST
GBR
ESP
IRL

12. Spanish business sector is fragmented
Spanish firms tend to be smaller when starting-up and they appear to grow less
than in most advanced economies.
Average size of firms by age and sector1
Number of employees
80
70
60
50
40
30
20
10
0
A. Manufacturing
0-2 years old
USA
LUX
CAN
BEL
FRA
HUN
GBR
AUT
SWE
NOR
BRA
FIN
NLD
PRT
ESP
NZL
ITA
JPN
80
70
60
50
40
30
20
10
0
B. Services2
Over 10 years old
USA
GBR
BEL
CAN
LUX
FRA
NOR
BRA
AUT
HUN
PRT
SWE
NLD
NZL
FIN
ESP
ITA
JPN
1. Average over the period 2001-11 for Belgium, Canada, Finland, Hungary, the Netherlands, the United Kingdom and the United States; 2001-10 for Austria, Brazil, Spain, Italy, Luxembourg, Norway and Sweden; 2001-09 for Japan and
New Zealand; 2001-07 for France; and 2006-11 for Portugal. Owing to methodological differences, figures may deviate from officially published national statistics. For Japan data are at the establishment level, for other countries at the
firm level. Data for Canada refer only to organic employment changes and abstract from merger and acquisition activity.
2. Non-financial business services.
Source: C. Criscuolo, P.N. Gal and C. Menon (2014), “The Dynamics of Employment Growth: New Evidence from 18 Countries”, OECD Science, Technology and Industry Policy Papers, No. 14.

13. Barriers to entrepreneurship remain high
Starting and operating businesses is more difficult than in most OECD countries
Barriers to starting and operating a business1
Index scale of 0-6 from least to most restrictive
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2013 2008
SVK
NZL
NLD
ITA
DNK
AUT
PRT
CAN
GBR
DEU
FIN
CHE
EST
AUS
OECD
FRA
JPN
HUN
NOR
SWE
BEL
SVN
CZE
KOR
GRC
IRL
CHL
ISL
ESP
ISR
1. OECD product market regulation indicator on barriers to
entrepreneurship. The OECD aggregate is an average of the data
shown.
Source: OECD (2013), Product Market Regulation Database,
www.oecd.org/economy/pmr.
Firms face both regulations that are unfavourable to their growth as well as a regionally and
locally fragmented regulatory framework. Spain has lacked flexibility to re-allocate resources to
more dynamic and productive firms.

14. Exports need further boosting
• Exports have led the recovery but Spain needs to continue diversifying to more
dynamic markets.
Share of exports by destination
Per cent of total goods exports, 2013
80
70
60
50
40
30
20
10
0
European Union Non-European Union
GBR GRC ITA IRL DEU FRA ESP PRT
Source: Eurostat (2014), "International trade long-term indicators", Eurostat Database, September.
• There is a also a relative overspecialisation in lower technology products.
• Competitiveness would be further boosted by higher competition in sectors
providing inputs to the rest of the economy (e.g. professional services) and in
ports and sea transport activities.

15. Deeper analysis provided in the Survey
Key recommendations on reducing unemployment faster
Activation:
• Improve efficiency of public employment services (new IT and other tools and
practices)
• Introduce personalised activation plans
• More clearly define job search and offer obligations
• Increase central and regional government coordination, performance based
funding to the regions and spread best practice across regions
• Make available new vocational education tracks to the unemployed

16. Deeper analysis provided in the Survey
Key recommendations on reducing unemployment faster
• Fiscal policy: cut employer social security contributions for low-skilled
workers to stimulate labour demand.
• Wage bargaining options: firm and union representation requirements for
collective agreements, “opt-in” rather than opt-out to collective agreements
• Employment protection options: converge termination costs for fixed-term
and permanent contracts, further define conditions for fair dismissal
• Housing and labour mobility: rolling periodic leases, means-tested housing
benefits, simple arbitration for disputes

17. Deeper analysis provided in the Survey
Key recommendations on harnessing innovation to
sustainably boost growth
• increase stability of government innovation funding
• greater specialisation and scale of universities and research
technology organisations
• more peer review and performance base funding
• streamlining certification for R&D tax credits
• wider career opportunities for researchers
• industrial PhDs
• predictable and low-cost support to low carbon technologies

18. Deeper analysis provided in the Survey
Key recommendations on skills and talent to sustainably
boost growth
• prevent drop-outs using new assessment and education paths
• strengthen vocational training
• increase information to students about jobs outcomes from tertiary
education
• improve career guidance

19. Deeper analysis provided in the Survey
Key recommendations on business sector performance
Facilitating start-ups and business growth:
• revamp the licence system and reduce regulatory fragmentation by
implementing the market unity law
• broaden the corporate tax base, lower the rate and review firm size-dependent
policies and regulations

20. Deeper analysis provided in the Survey
Key recommendations on business sector performance
Fostering internationalisation and strengthening competition:
• integrate internationalisation and innovation policies
• strengthen port and electricity regulators; open access to stevedoring
activities
• reduce numbers of professions for which membership of the professional
body is required
• reduce vertical integration in the electricity market
• pursue efforts to increase judicial efficiency

21. Deeper analysis provided in the Survey
Key recommendations on business sector performance
Tackling over-indebtedness and improving firms financing:
• increase incentives for the use of out-of-court and in-court insolvency
procedures by SMEs
• introduce a new out-of-court negotiated personal insolvency regime
• continue to promote diversified financing sources
• make further use of mutual guarantee schemes
• establish a comprehensive credit registry for SMEs

22. OECD Economic Surveys: Spain 2014
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