Spain: Competitiveness challenge
Output growth, which reached 3.7% in 2006, should moderate somewhat in 2007 and 2008 as monetary conditions tighten and exports are expected to weaken. It will remain robust, however, pushing the unemployment rate to below 8%. With inflation stabilising at around 3%, the differential with the euro area is unlikely to shrink significantly, implying a further erosion of international competitiveness.
A more restrictive fiscal policy would be useful not only in reducing domestic demand pressures that have fed into inflation, but also in preparing for the fiscal consequences of ageing. However, reducing the inflation differential will still require structural reforms that foster competition in sheltered sectors and limit the use of indexation clauses in wage agreements. Lowering the country’s energy intensity of production would reduce longer-term vulnerability to oil-price shocks.
|Population (000s), 2005||43 398|
|Area (000 sq km)||505|
|GDP (Billion USD), 2005||1 182.6|
|Life expectancy at birth (Women, Men), 2004 ||83.8, 77.2|
|Total labour force (000s), 2005||20 886|
|Government type||Parliamentary Monarchy|
|Indicators||% change unless otherwise indicated|
|Household savings ratio||10.0||10.1||10.0|
|Consumer price index||3.5||2.7||3.2|
|Unemployment rate (%)||8.4||7.8||7.6|
|General government financial balance|
|Current account balance (% GDP)||-8.8||-9.2||-9.6|
No. 258/259, December 2006