Spain: Residential construction falls
Economic growth is likely to slow in 2008 and 2009, as residential construction falls. Private consumption may decelerate, reflecting lower employment gains and tighter credit conditions. From a peak in late 2007, inflation should decline as demand pressures moderate.
In order to minimise output losses resulting from the slowdown in domestic demand, the indexation of wages to past inflation should be eliminated. Competition in product markets, in particular in retail distribution, needs to be nurtured to raise medium-term growth prospects. Calls for further relaxation of fiscal policy should be resisted in order to tackle the future fiscal consequences of population ageing.
No. 264/265, December 2007-January 2008
• OECD Economic Outlook No. 82, December 2007
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