Spain urgently needs to improve the efficiency of its public sector. This is highlighted by the monograph ‘Pending challenges of the Spanish public sector’, included in the latest issue of the magazine ‘Papeles de Economía Española’, published by the Foundation of Savings Banks (Funcas). In the article, the economists José Emilio Boscá, Rafael Doménech, Javier Ferri, David Sarasa and Camilo Ulloa analyze the comparative evidence between Spain and the European Union (EU) on the size of the public sector and its efficiency, with a special focus on the structure of public spending and income.
The analysis published by Funcas highlights that Spain needs to significantly improve the efficiency of its public sector to “successfully” address the sustainability of the welfare state, especially given the fact that the country has higher levels of public debt and deficits. higher than other neighboring States, which increases their vulnerability to possible economic shocks
The report makes it “clear” that the agenda of pending reforms in this area is “extensive” and explains that, in 2023, public spending as a percentage of GDP in Spain reached 46.4% of GDP, three percentage points below the weighted EU average (49.4%), and approximately at the same level as the unweighted average (46.5%). However, in terms of per capita income, Spain is 11.6% below the EU average (both weighted and unweighted).
This size of the public sector places Spain in an intermediate position in the EU. Countries like France and Belgium are significantly larger in size, while others like Holland or Irelandwith a higher per capita income, show a smaller public sector.
In any case, these experts indicate that the Spanish economy has “ample room” to improve the efficiency of its public sector, which is significantly behind countries with more efficient public sectors, taking advantage of the opportunities offered by new digital technologies. and the evaluation of public policies, and betting on an income and expense structure that maximizes the potential growth of its per capita income.
«This improvement in efficiency is a necessary condition to successfully face the sustainability of the welfare state, especially due to the fact that Spain has higher levels of public debt and deficits, which increases its vulnerability to possible economic shocks. Especially in an environment of greater demands due to the processes of population aging and decarbonization,” the monograph argues. For this reason, he affirms that it is “urgent” to adopt reforms that strengthen the sustainability of public accounts in the long term.
Furthermore, he emphasizes that Spain has been little reformist in the last 25 years and some of the issues mentioned “affect us more intensely than the average”, such as the aging of the population.
Regarding the structure of public spending, the article indicates that Spain has a greater weight of social spending in relation to production than in the EU. On the contrary, for years, the weight of public investment in the GDP of the Spanish economy has been between levels lower of the EU countries, which determines the potential for long-term economic growth.
Likewise, the structure of public revenue is also different. With a tax on capital similar to that of the EU, the indirect and labor taxes on income tax are lower, while social contributions are higher, due to the greater taxation that falls on companies.
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