Saturday, March 25, 2023

Spain has succeeded in leaving behind Germany, Canada, Denmark and Japan in social spending

spain It is one of the developed countries furthest behind in recovering to pre-pandemic GDP levels, something that, according to experts, will probably not happen until 2024; However, it is in the leading group of economies that have increased their public social spending the most in recent years. This bifurcation translates into an increase in public debt, which hit an all-time record of over US$1.63 trillion last November (despite the fact that the economic recovery reduced its weight in GDP to 115.9%) and income and expenditure. in the imbalance between

Last year, in public social spending spain According to estimates published yesterday by the club of the most developed economies on the planet, it stood at 28.1% of GDP (about US$380,026 million), the sixth highest among the 38 countries that make up the OECD. Huge resources were allocated to pensions, health, civil servants, unemployment benefits or anti-crisis schemes, first because of the Covid pandemic and now because of the war in Ukraine.

With this percentage, social spending in Spain in 2022 is seven points above the OECD average (21.1%) and higher than countries with solid welfare states such as Germany (26.7% of GDP), Denmark (26.2%), Canada (25.5%) Done. ) or Japan (24.8%).

The ranking was led by France, whose spending on public services reached 31.6% of GDP and which is now facing a strong social backlash for its pension reform to delay the retirement age to 64. Is; and Italy, which allocated 30.1% of its GDP to social spending. They were followed by Austria with 29.4% and both Finland and Belgium with 29%.

long jump

In 2019, before Covid caused earthquakes in the world economy and forced governments to deploy an unprecedented economic and social shield, social spending in Spain was 24.6% of GDP, 4.5 percentage points above the OECD average , but below such countries as Germany (25.6%) or Denmark (28.4%). The pandemic drove these figures to unprecedented heights, pushing the Spanish proportion to 31.2% in 2020; That is, 6.6 points in just one year, the second largest increase after the increase recorded by Canada, which went from 18.6% to 25.5% (6.9 points).

Although the collapse of the economy due to the Covid crisis had to do with this strong quantitative jump in the proportion of GDP spending, the OECD qualifies that “more than 80%” of this increase was due to a strong increase in spending and not The economy took a hit, which in the case of Spain ended up with a contraction of 11.3%.

As in the rest of the country, the ratio of spending to GDP in Spain is expected to fall to 29.5% in 2021 and 28.1% in 2022, thanks to the economic recovery, which reduced the relative burden of spending, but also to a reduction in chapters related to Covid. , such as health services, unemployment benefits or Erte, which affected more than 3.6 million workers at the height of the pandemic and which barely exceeded 30,000 last October.

However, the outbreak of war in Ukraine and the rise of inflation have prevented further reduction of this ratio, prompting states once again to extend a safety net through subsidies, specific tax cuts and other forms of aid. has been forced. Energy prices and costs.

But the problem goes beyond the temporary increase in spending caused by the new crisis, because a significant part of this increase has remained structural, in areas such as pensions and the health system, in fact the two biggest spending chapters of the social public.

On average, pension spending in the OECD represented 7.7% of GDP in 2019 (latest available data). Already, Spain was far above the average for developed countries with 11.3%, which was the seventh highest in the whole of the OECD. This ratio has already increased to 11.7% in the average of the last twelve months, which will weigh more on GDP in the coming months. First, because the pension payroll does not stop growing due to an increase in the number of beneficiaries. and second, due to the revaluation of benefits with the CPI (8.5%), an increase that consolidates public spending and which, in the context of an economic slowdown, will skyrocket its weight on GDP this year.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
Latest news
Related news