This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.

In a context of high inflation and an uncertain outlook due to Russia’s war of aggression against Ukraine, the Spanish economy has held up well. The cost of living has increased, spurred by rising food and energy prices.

Following the outbreak of Russia’s war of aggression against Ukraine, sizeable measures were implemented by the government to cushion the inflationary shock and to support the economy, and economic growth held up remarkably well in the second half of 2022 and the first one of 2023. Going forward, public policy should continue to address Spain’s structural weaknesses. First, although the 2021 labour market reform has made it possible to reduce the high share of temporary contracts, unemployment remains the highest in the OECD and the integration of young people into the job market remains challenging. Second, income inequalities and poverty remain significant and poverty especially among young people. Third, Spain’s growth potential is low and is expected to remain so, notably given the rapid ageing of the population. Stepping up the pace of fiscal consolidation should be a priority, given the demographic outlook and high public debt. Fulfilling Spain’s ambitious objectives to fight climate change will require a strong commitment of all economic agents and a more environment-friendly tax regime.

Spain is a richer, healthier, more open, and freer country to live in today than one generation ago. However, young people in Spain have a difficult transition to an independent, productive, and happy adult life. Early school leaving and grade repetition are frequent, even if they have come down. Youth unemployment is among the highest in the OECD, and those young people who find work often face temporary and part-time positions, low-paid jobs, and subpar working conditions. Increasing funding for early childhood education and care, supporting students at risk of falling behind and improving career counselling can help more people make the most of their education. Labour market outcomes for the young can also be improved by strengthening the connection between the educational system and the labour market, including by fostering collaboration between SMEs to provide apprenticeships to students. A well-funded and better-connected public employment service is also key. Boosting the low level of entrepreneurship among young people requires additional support policies, both financial and educational, to compensate for skill shortcomings and difficulty accessing financing. A challenging transition from education to work, coupled with lack of housing and high rental prices, often means delaying independent life. A higher provision of social rental housing would make housing more affordable for more young people.