Structural reform in Spain (CR 2018)

The Spanish economy has been growing at over 3 percent since 2015, above the average for the EU and the euro area. Unemployment, although still 10 percentage points above the EU average, has fallen from a high of 26.1 percent in 2013 to 17.2 percent in 2017. Interest rates are at historical lows thanks to the expansive monetary policy of the European Central Bank. The public deficit has fallen substantially in recent years and is close to, but still above, 3 percent, and there has been a current account surplus for several years. Therefore, Spain's macroeconomic situation appears healthy. However, major vulnerabilities still threaten to hinder long-term growth: high unemployment and mismatches in the labour market, high structural public deficit and external debt, and low productivity growth. Spain must address these vulnerabilities via structural reforms. Structural reforms are a critical factor for long-term growth. If correctly designed and implemented, such reforms can improve the functioning and integration of markets, enhance the degree of fair and open competition, increase incentives for innovation and help the economy to more efficiently allocate resources. In turn, these outcomes can help create the right conditions for increased productivity, which paves the way for higher growth and competitiveness. However, it is crucial to both monitor the progress of national reform programmes and evaluate their effectiveness at the macro- and microeconomic levels.