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2007 OECD Economic Surveys: Spain 2007

image of OECD Economic Surveys: Spain 2007

This edition of OECD's periodic survey of Spain's economy examines the key policy challenges Spain will be facing.  In particular, it examines the chellenges of returning to more sustainable growth, of managing fiscal policy, of strengthening innovation and of improving the functioning of goods and services markets.

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Medium and long-term fiscal issues

Budget outcomes have steadily improved in the last decade, as Spain has continued its fiscal consolidation process. Several forces could make it more difficult to maintain the current prudent medium-term fiscal policy, which is needed both to provide room to manoeuvre in case of an economic downturn and to prepare for the budgetary effects of the predictable sharp deterioration in the age structure of the population that will take place in the coming decades. Against this background, the authorities have signalled their commitment to maintain a sound fiscal policy. They have also adopted a series of reforms that aim to increase public-sector efficiency and prepare for the long-term fiscal effects of the ageing process and the resulting rise in demand for health and dependency care. This chapter aims to analyse the forces acting on both the revenue and expenditure sides of the budget in the longer term and the authorities’ strategy to address them. It also provides some advice, in light of the previous analysis, to ensure that the medium- and longer-term fiscal objectives are jointly consistent.

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