The OECD, an organization made up of mainly high-income countries, recommends that the Government launch a fiscal adjustment plan as soon as possible to redirect the situation of Spanish public finances.. The organization believes that Spain needs to undertake a “strong” and “sustained” fiscal consolidation to keep the debt on a downward path and thus be able to generate room to assume the increase in spending linked to the aging of the population or undertake transformative investments that drive growth. .

This is what the economists of the Paris-based institution point out in their fall macroeconomic projections report for 2024 published this Tuesday.. The OECD sees the need for a more ambitious fiscal adjustment than the one the Government has hinted at so far.. The organization believes that with the measures on the table the public deficit would fall to 3.2% of GDP next year, still above the limits allowed by Brussels.

In this way, the organization joins the call to tighten the belt that has already been raised by the IMF or the European Commission itself in view of the return to fiscal rules next year after four years of suspension.

Adjustment recommendations for European countries have been taking place in recent weeks. The deteriorated appearance of public finances in the Old Continent after the pandemic and the war in Ukraine have left several Member States, including Spain, in a difficult situation.. The latest to have problems has been Germany, champion of fiscal discipline, which has even had to suspend constitutional limits on debt to face a budget crisis.

In Spain, the Executive has sent to Brussels a budget plan for 2024 in which all anti-crisis energy support measures decline, while in the expenses section free state public transport is maintained, the revaluation of pensions is included and the increase in the salary of civil servants.

However, the Government has only just started the budget process and no member of the Council of Ministers has yet closed the door to extending any of the measures that expire in December.. In fact, Pedro Sánchez himself announced during his investiture session that he will extend the VAT reduction on certain basic foods until mid-2024.

Furthermore, it is far from clear that the Executive will be able to carry out public accounts for 2024.. First, the coalition partners will have to agree; Then they will have to be able to convince five nationalist political forces of different political stripes (ERC, Junts, EH Bildu and PNV) and, if that were not enough, they will have to be able to overcome the more than foreseeable PP veto on the spending ceiling in the Senate.

Less growth in 2024, but above the eurozone

Regarding economic growth, the OECD forecasts GDP growth of 2.4% in 2023, which would slow to 1.4% in 2024. The forecast of the Paris-based organization is more pessimistic than the one it presented almost three months ago. The growth forecast for 2024 has been lowered by half a point and is distanced from that of the Government, which expects a GDP increase of 2%.

Even with everything, Spain would be one of the countries that would grow the most in the euro zone in both 2023 and 2024. The OECD predicts that the euro zone economy will barely advance 0.6% this year and 0.9% next year. Among the large euro economies, Germany will suffer a contraction of 0.1% this year and will only grow by 0.6% in 2024. In the case of France, GDP will rebound by 0.9% this year and by 0. 8% next year, while in Italy the economy will grow at a rate of 0.7% both this year and next.

As most analysts point out, the only engine that will move the Spanish economy in 2024 will be domestic consumption, which should be boosted by the recovery of purchasing power caused by the fall in inflation and the rise in wages. European recovery funds will also play an important role, which should sustain investment over the coming years.