Spain | Labor market and pension system in 2023

In a context of high uncertainty due to the war in Ukraine, the energy shock and higher and more persistent inflation than expected over the last year, forecasts for Spain point to an economic slowdown in 2023, with GDP growth at 1.2%.

Key points

• Key points:
• According to BBVA Research forecasts, the Spanish Labor Force Survey (EPA) indicates that employment growth for 2023 will be 1.1% (1.1% in terms of full-time equivalent employment), so the expected improvement in productivity per employee would be practically nil.
• Undoubtedly, the most important development for the labor market in 2022 was the implementation of the labor reform approved at the end of 2021 (RDL 32/2021). As expected, the restrictions on temporary contracts resulted in a significant increase in permanent contracts (both ordinary full-time and part-time as well as fixed-term).
• One of the challenges for the labor market in 2023 will be to address the possible materialization of economic risks (international or domestic) that result in lower-than-expected economic growth, even with some quarters of economic recession, in addition to avoiding second-round effects that generate spiraling prices, wages and margins.
• As for the pension system, the recent measures adopted will increase the expected deficit of the contributory pension system (around 2.4% of GDP in 2023, approximately 60% of the expected deficit of the Public Administrations) and pass it on to the State.
• According to the General State Budget, in addition to a deficit forecast for non-financial operations of around EUR 7 billion, in 2023 the Social Security will need transfers from the State of almost EUR 39 billion, accounting for slightly more than 25% of the expected EUR 152 billion in social security contributions.

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