June 20, 2021

Spain, below the OECD average in economic and business freedom


Madrid

Updated:

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Spain is among the countries with the worst index of economic freedom within the OECD (Organization for Economic Cooperation and Development). Specifically in position 26 out of 37 among these nations, 18 in the EU, and in position 39 worldwide. Although globally it climbed nineteen places in the last year, according to the Economic Freedom Report (ILE) published every year by the foundation Heritage and that is edited in our country by the Institute of Economic Studies (IEE), a think tank of CEOE.

In other words, our country occupies a low position in terms of economic freedom among developed countries, with an index five points below the OECD average and behind nations such as Czech Republic and Latvia, community territories that were opened to capitalism less than 30 years ago. Although the document considers Spain as a country of “moderate” economic freedom.

To carry out the measurement, the report includes four main pillars: the rule of law (property rights, judicial effectiveness and the absence of corruption), the state size (tax burden, public spending and budgetary strength and fiscal health), the regulatory efficiency (freedom of business, labor flexibility and monetary freedom) and the market opening (commercial freedom, investment freedom and financial freedom). Of all these subcategories, Spain only exceeds the OECD average in three of them: investment freedom (85 points), commercial freedom (84 points) and monetary freedom (83.5).

These indicators have also been differential during the pandemic. Thus, the countries with more economic freedom in the classification presented an average contraction of the GDP 4.1%, compared to 7.5%, of countries with moderate or low economic freedom. In the case of Spain, there was a decrease of 11%, especially due to restrictions on mobility that paralyzed tourism, a key sector for the national economy.

“This index also shows that economic freedom leads to higher economic growth. Since the beginning of this publication in 1995, the countries in which economic freedom has grown, on an annual average, by 2.6%, while those where economic freedom has been reduced have an average growth of 1, 7% “, says the IEE.

At the top of the rankings, Singapore (89.7 points) New Zealand (83.9) AND Australia (82.4). For its part, Estonia Y Denmark, with eighth and tenth place respectively, they are the highest ranked EU countries in the ranking.

Obstacles

Notably, the poor position of Spain in terms of fiscal health, where it ranks 34th out of 37 OECD countries. «It is of little use if taxes are low if spending is artificially high and the deficit gap is covered by public debt, since this only implies transferring taxes from today to tomorrow and generating a mountain of obligations that will grow over time, “says the document.

Although the report above all highlights the position of our country among all of them in the field of business freedom, where it is already the sixth country with the most obstacles to business activity «being this a particularly relevant variable and that refers to the ability to open and manage a business operation without interference or undue interference by the State ”.

Specifically, Spain has a score 14% lower than the average for the OECD and 9.5% lower than the average for the EU. “In addition, the drift it has experienced in this regard in recent years, mainly as of 2017, is worrying” abounds in the IEE, which also points to the loss of fifteen points in this factor during the last decade.

In order to improve in this sector, the IEE recommends that reforms be carried out to avoid unpredictability and legal uncertainty, “since they are factors of regulatory risk, which undermines the efficiency of the sectors, affecting companies and users”, and emphasizes the importance they now have of attracting investors, especially in the case of foreign investments.

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