Croatia’s economy has experienced robust and resilient GDP growth and improved living standards over the past decade. Yet a rapidly shrinking and ageing population threatens future growth and fiscal sustainability. Advancing pension, health care and labour market reforms will be essential to extend working lives, improve healthy ageing and raise labour force participation.

By Federica De Pace and Oliver Roehn, OECD Economics Department

In the past decade, Croatia’s economy has experienced strong and resilient GDP growth, outpacing OECD and euro area averages. Wide-ranging structural reforms as well as the integration into the EU, euro and Schengen areas all helped boost living standards. However, Croatia’s population is shrinking and ageing rapidly, a combination that bodes ill for future economic growth and public finances. According to UN projections, the working age population will decline by about 25% between 2024 and 2050 (Figure 1). Moreover, for every ten working-age Croatians, there are about four people older than 65 today; by 2050 there will be nearly six. A smaller workforce will drag down growth. According to the OECD Long-Term Economic Model, GDP growth is projected to fall from over 3% per year on average in the last decade to 0.5% by 2050. At the same time, spending on pensions, health care and long-term care will come under increasing pressure.

According to the 2026 Economic Survey of Croatia, addressing demographic challenges requires pension, health care, and labour market reforms to extend working lives, bring more people into the labour force, improve the health of the ageing population, and enhance the efficiency of public spending.

Average pensions of the current generation of pensioners are low, mainly due to short contribution periods. In 2024 the expected duration of working life was just 34.8 years, compared with an EU average of 37.2 years. Short working lives and hence pension contribution periods help explain why relative poverty among older people is nearly twice the OECD average. A recent pension reform aims to increase pension incomes, but comes at a significant fiscal cost. Further tightening early retirement options and increasing the retirement age in line with gains in life expectancy would prolong working lives and help improve pension income without jeopardising the sustainability of the pension system.

Health outcomes also need to improve to enable longer working lives. A higher share of adults aged 65 and over than in most OECD countries report long-standing limitations in their daily activities due to health problems. Improving health outcomes in a cost-effective way requires stronger prevention policies and higher taxes on unhealthy products, more accessible primary care, and higher quality and efficiency of hospital care, including by centralising complex care in specialised facilities.

Population ageing will strain the long-term care system. Today, care relies heavily on informal family caregivers—mainly women—creating significant physical and emotional burdens and limiting their labour-market participation. As care needs grow, this model will become unsustainable. Reforms are needed to expand the formal long-term-care workforce, by improving working conditions and formalising work contracts. Spending on long-term care must rise to improve access and quality of care. Insurance-based models, like those in Germany, Japan, the Netherlands, and Slovenia, can be a solution to ensure adequate funding. Better integration of health and social services would make long-term care more efficient and sustainable.

Bringing younger and older people into the labour force is essential to mitigate the impact of ageing (Figure 2). Stronger work-based learning in vocational education could ease school-to-work transitions. Expanding affordable childcare and formal long-term care would lift employment among women. Among older workers, disability and poor health are major barriers. The employment gap for people with disabilities—36 percentage points in 2024, more than double the EU average—suggests that earlier intervention and broader access to professional rehabilitation are needed. Removing age limits on rehabilitation and linking disability benefits to participation in rehabilitation, would help retain more workers.

Well-designed immigration policy can help ease skills shortages. Croatia has recently seen higher immigration, reversing decades of net emigration, as living standards improved and entry procedures were streamlined. To maximise the gains, however, more efforts are needed to better align migrants’ skills with current and future labour-market needs. Regular assessments and forecasts of skills shortages, more favourable permit conditions for workers in high-demand occupations, and stronger integration services, would improve the country’s ability to attract and retain the workers it needs the most.

References:

OECD (2025), OECD Economic Surveys: Croatia 2026, OECD Publishing, Paris, https://doi.org/10.1787/b52e3ac0-en

Romania has made remarkable progress in converging toward OECD income levels over the past two decades, supported by deeper integration into global markets, substantial capital inflows, and wide‑ranging economic reforms.

by Katja Schmidt, OECD Economics Department

Romania has made remarkable progress in converging toward OECD income levels over the past two decades, supported by deeper integration into global markets, substantial capital inflows, and wide‑ranging economic reforms.

These forces have driven strong productivity gains (Figure 1), bringing labour productivity close to the OECD average. Yet significant untapped potential remains. Further boosting the productivity of domestic firms and integrating them more deeply into global markets would raise the domestic value‑added content of production and help the country move up the value chain. At the same time, realigning wage dynamics more closely with productivity growth – which wages have outpaced in recent years – will be essential to safeguard competitiveness and support sustained improvements in living standards.

The new 2026 OECD Economic Survey of Romania highlights four key priorities to increase the integration of domestic firms into global markets while supporting broader productivity gains:

• Strengthening innovation capacities and digital intensity among domestic firms
• Promoting human capital development and skills
• Improving the business environment and market efficiency
• Fostering infrastructure development.

The innovation gap remains wide compared with both OECD and regional peers. Domestic firms continue to exhibit low rates of product, service, and process innovation, as well as limited R&D investment (Figure 2). Closing this gap requires measures to strengthen firms’ innovation capacities – for example, by simplifying access to R&D tax incentives and raising awareness of their availability. Innovation among SMEs could be further supported by making R&D tax incentives more effective, including through refundability so that any credit exceeding the tax liability is paid out in cash, and by establishing well‑defined public-private project opportunities that encourage SME participation in R&D. In parallel, improving firms’ access to finance and advancing financial deepening – including through more developed capital markets – will be essential to enable productivity‑enhancing investment, foster innovation, and support firm growth and scaling.

Romania’s digital infrastructure has improved significantly: access to high‑speed broadband is now approaching levels seen in the best‑performing OECD countries. However, digital intensity and the use of digital technologies by firms remain low. This reflects relatively low digital skills in the wider population, which should be strengthened as a priority. Awareness of and access to digital advisory and support schemes could also be improved. Ireland’s Grow Digital portal provides a useful example of good practice, consolidating support programmes, training and funding information, and a self‑assessment tool to help firms identify their digital needs.

Figure 2. Romania’s R&D spending is very low

Gross domestic expenditure on R&D, 2024 or latest available

Note: OECD CEEC is the non-weighted average of Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: OECD Main Science and Technology Indicators database.

The economy’s productive capacity depends critically on the availability of advanced skills. As Romania moves up the value chain, demand for technical, digital, and managerial competencies is set to rise. Yet the country starts from a challenging position, with a high share of adults with low educational attainment, persistently elevated early‑school‑leaving rates, and comparatively weak learning outcomes. Addressing these gaps requires broad‑based reforms, as recognised in the 2023 education reform. Romania should focus resources on key priorities and ensure effective delivery – modernising curricula, strengthening teacher capacity, and investing in school infrastructure, particularly in disadvantaged areas. These efforts must be supported by sustainable and adequate financing, alongside a stronger focus on lifelong learning and continuous skills upgrading.

Fostering a dynamic, growth‑oriented business environment requires a regulatory framework that supports entrepreneurship, competition, and firm expansion. While Romania has made progress in improving the regulatory environment and market efficiency, further steps are needed. Starting and operating a business remains more burdensome than in top‑performing OECD countries, despite ongoing simplification efforts. Priority should be given to accelerating the implementation of the streamlined single industrial licensing procedure and strengthening the insolvency framework – including by improving the efficiency of court procedures and expanding the use of digital tools in insolvency cases. Further improvements in the efficiency and accessibility of public procurement processes are also required

Finally, the Survey highlights opportunities to further strengthen transport infrastructure, including by improving network connections, ensuring more efficient transport pricing, and enhancing road maintenance. Promoting alternative low‑emission transport modes and improving governance in the transport sector will also be essential to support sustainable mobility and improve overall system performance.

Visit the OECD’s Romania Economic Snapshot page for further information.

References:

OECD (2026), OECD Economic Surveys: Romania 2026, https://doi.org/10.1787/4844067e-en, OECD Publishing, Paris.

Argentina is going through one of the most comprehensive reform efforts in its history. Since late 2023, the authorities have taken unprecedented measures to reform fiscal, monetary, trade and regulatory policies, all of which have triggered significant improvements in the business environment. For this transformation to translate into new jobs and better living standards, policymakers need to continue reducing institutional and market frictions that impose costs on the reallocation of workers from low- to high-productivity sectors.

By Priscilla Fialho, OECD Economics Department

Argentina’s recent reform efforts are bearing fruits, and key macroeconomic indicators have improved significantly. Growth has likely exceeded 5% in 2025 and is projected to remain above 4% in 2026. Annual inflation fell from more than 200% in late 2023 to slightly above 30% in December 2025, and the government achieved a balanced budget for two consecutive years. Despite tighter fiscal policy and domestic financial conditions, labour markets have remained resilient and the poverty rate fell from a peak of 53% in early 2024 to about 32% in the first half of 2025. Following the introduction of a more flexible exchange rate framework in January 2025, foreign reserve accumulation has finally resumed. Markets have responded positively, and the country risk declined to levels consistent with a potential return to international capital markets.

The ambitious reform programme quickly led to improvements in sectors where Argentina has vast comparative advantages. Investments accelerated in the oil and gas and the mining sectors, both of which will help reduce external vulnerabilities in a durable manner. Lower export taxes are encouraging an expansion of agricultural production. More competitive manufacturing sectors are expected to expand at the expense of more traditional ones, thanks to lower prices for imported inputs and capital goods. At the same time, less stringent foreign exchange regulations and the expansion of private credit are supporting financial intermediation and knowledge-based sectors.

But expanding activity has not always come with sizeable increases in formal employment. Out of 19 sectors, only 6 officially increased their staffing levels in the last two years. Where employment has increased, this was mostly driven by informal jobs, which already account for about half of employment. Widespread informality can limit growth opportunities in the future, as informality often keeps resources trapped in low-productivity activities, discourages on-the-job training and undermines the public sector’s capacity to deliver high-quality public services. More visible improvements in labour market and social outcomes would also bolster public support for further reforms. In a nutshell, one challenge ahead is to ensure that growth translates into higher-quality employment.

Labour market regulations have been historically rigid

Despite recent improvements, Argentina still has stricter labour market regulations than other countries, based on the OECD Employment Protection Indicators that compare the stringency of hiring and dismissal rules across countries (Figure 1).

Figure 1. Argentina has stricter labour market regulations than peers

In Argentina, employers can only dismiss workers in cases explicitly defined by law. This holds both for individual dismissals – where employers wish to separate from individual employees- and to collective dismissals – where firms wish to downsize there workforce. The definition for collective dismissals is exceptionally restrictive in Argentina and the administrative procedure particularly onerous. In addition, court cases can take a long time – on average, between two to four years – and can be filed up until two years after a dismissal, exposing firms to elevated uncertainty and contingent litigation risk. Severance payments, the compensation that firms have to pay in case of dismissal, are also high in international comparison, significantly exceeding those in regional peers. These payments amount to one month of salary for every year of service in most cases, without any cap.

In addition, Argentina has the highest average labour tax wedge in Latin America, above most OECD countries (Figure 2). The labour tax wedge is the difference between what it costs a firm to employ someone and the worker’s take-home pay, which in the case of Argentina can be almost fully attributed to social security contributions. High social contributions discourage demand for and supply of formal labour.

Finally, the collective bargaining system is another source of labour market rigidities. Collective bargaining is organised at the sectoral level, where the labour unions and employer organisations with the highest number of members have the monopoly to bargain on behalf of all firms and employees in the sector. Agreements made between the signatory parties are then automatically extended to the entire sector. Firm-level agreements are strictly regulated by higher-level agreements and cannot apply less favourable terms for employees. Agreements remain valid until a new negotiation takes place, and outdated agreements often last over long periods of time, making it difficult for firms to adapt to changing environments.

Figure 2. The labour tax wedge increases the unit cost of labour

Strict labour market regulations hurt particularly the most vulnerable

An extensive international academic literature suggests that rigid labour market institutions and limited opportunities for job mobility are associated with lower investment, formal employment, productivity and output. First-time jobseekers without relevant experience, older workers who struggle to keep up with new technologies, or less-educated workers, may be particularly affected. Smaller and younger firms may also be at a disadvantage, struggling to compete with large firms that often find it easier to bear the resulting compliance costs.

The last OECD Economic Survey of Argentina provides several policy recommendations to enhance the flexibility of labour market regulations and increase incentives for formal employment. The Survey recommends reducing the amount of severance payment mandated by law. In Chile, for example, severance payments are limited to 330 days of service. The report also encourages the wider application of schemes that provide a voluntary alternative to standard severance payment rules, such as individual worker accounts that can be accessed for income support at the termination of employment, and whose remaining balances can be carried over to new jobs. Moreover, the Survey provides examples of OECD countries that introduced temporary opt-out clauses, allowing the suspension or the firm-level renegotiation of sectoral agreements in cases of economic difficulties. Finally, the Survey discusses options to reduce the labour tax wedge, in particular social contributions, without jeopardising Argentina’s fiscal consolidation efforts. One option would be to unify the current array of available social benefits into a universal multi-pillar system that includes informal workers and provides better incentives for formal job creation. A recent OECD report expands on that discussion, quantifying the estimated fiscal cost of such reforms.

The time for reform is now

Argentina’s Congress is currently debating a labour market reform proposal. The proposal seeks to address some of Argentina’s main challenges:

• More flexible employment protection. The bill aims to reduce uncertainty and contingent litigation risk upon dismissal by clarifying that severance pay is the only compensation that can be claimed upon the termination of an employment contract, thus excluding the possibility of additional civil appeals and indemnities.  In addition, it seeks to introduce a voluntary Labour Assistance Fund to cover severance payments from monthly employer contributions of 3% of workers’ remuneration.
• Lower labour tax wedge. Employers adhering to the above-mentioned fund will have a 3% reduction in pension contributions.
• Modernise collective wage negotiations. The draft bill proposes that firm-level agreements can prevail over agreements of a broader scope, whether prior or subsequent. It also intends to limit the automatic extension of clauses once an agreement expires.

Research shows that the timing of labour market reforms matters. Labour market reforms that facilitate the reallocation of workers are much more likely to have positive short-term and long-term effects on employment during economic expansions, and Argentina’s economy is currently growing strong. The timing for a labour market reform could hardly be better.

References

OECD (2025), OECD Economic Surveys: Argentina 2025, OECD Publishing, Paris, https://doi.org/10.1787/27dd6e27-en.

Por Aida Caldera, Claudia Ramírez y Dimitris Mavridis, OCDE

Versión en inglés

Desde la pandemia, la economía española ha crecido de manera firme y más rápido que muchos de sus pares europeos (Gráfico 1). El crecimiento se ha visto respaldado por una fuerte inversión, principalmente pública, el aumento de las exportaciones de servicios y una rápida expansión de la fuerza laboral ya que muchos inmigrantes, principalmente procedentes de América Latina, se han integrado rápidamente en el mercado laboral. El empleo está creciendo en todos los sectores, mientras que el desempleo ha descendido de alrededor del 15% en 2021 al 10,5% en septiembre de 2025, aunque sigue siendo el más alto de la Unión Europea. Los contratos temporales, que durante mucho tiempo han sido el punto débil de España, han descendido de más del 25% a aproximadamente el 16% en los tres años posteriores a la reforma del mercado laboral de 2021.

Más allá de estos encabezados alentadores, un desafío en materia de productividad amenaza con debilitar la prosperidad a largo plazo de España, como se destaca en el recientemente publicado Estudio Económico de España de 2025. El crecimiento sostenido y la convergencia de los ingresos con otros países similares de la OCDE dependen de la aceleración del crecimiento de la productividad y del aprovechamiento de los recursos sin explotar.

Gráfico 1. El crecimiento del PIB ha superado recientemente al de otros países europeos

Producto interior bruto, volumen, datos ajustados por estacionalidad y efecto calendario, índice 2019T4 = 100

Fuente: Eurostat.

Le reto de la productividad

España está creando empleo a un ritmo más rápido que la mayor parte de Europa, y la productividad por trabajador ha crecido desde 2022, especialmente en los sectores del comercio, el transporte y la hostelería. A pesar de esta mejora, el PIB por hora trabajada en España seguía estando un 7% por debajo de la media de la UE en 2024 (Gráfico 2, Panel A). Este déficit de productividad no se limita a un solo sector rezagado, sino que afecta tanto a las actividades comercializables como a las no comercializables, así como a empresas de todos los tamaños.

El crecimiento del PIB se mantendrá sólido, con un 2,9% en 2025, un 2,2% en 2026 y un 1,8% en 2027, a medida que se normalice la expansión del turismo y se moderen los flujos migratorios. Para mantener este impulso de crecimiento y acelerar la convergencia de los ingresos, será fundamental reforzar el crecimiento de la productividad.

La oportunidad de las pymes

Las pequeñas y medianas empresas son el centro del desafío de productividad de España, y son igual de importantes para superarlo. Las pymes son el 99% de todas las empresas españolas y emplean a casi dos tercios de la fuerza laboral, lo que las coloca en el centro del motor económico del país. Sin embargo, comparado con pares de otros países, las pymes españolas tienden a ser más pequeñas, crecer más lentamente y operan a niveles de productividad significativamente más bajos que los países con mejor rendimiento de la OCDE (Gráfico 2, Panel B). Estas diferencias reflejan las mayores restricciones financieras a las que se enfrentan las pymes, sus menores índices de innovación y las desproporcionadas cargas normativas y de cumplimiento que este grupo de empresas soportan en comparación con las pymes de muchas otras economías europeas.

Consciente de estos retos, España ha puesto en marcha una ambiciosa agenda para las pymes respaldada por el Plan de Recuperación, Transformación y Resiliencia, que destina alrededor del 40% de los fondos en subvenciones al emprendimiento, la digitalización y la internacionalización. Sin embargo, aún se puede hacer más para liberar el potencial de las pymes:

• Mejorar el acceso a la financiación mediante el fortalecimiento de los canales de financiación basados en el mercado y la conexión de las pequeñas empresas con los participantes en los mercados de capitales, al tiempo que se sensibiliza a las pequeñas empresas sobre las opciones de financiación no bancaria disponibles.
• Simplificar la regulación y los procedimientos administrativos que más afectan a las empresas más pequeñas, incluyendo la introducción gradual de umbrales regulatorios que provocan aumentos repentinos en los costes de cumplimiento cuando las empresas crecen.
• Simplificar los procedimientos de solicitud y reembolso de las ayudas públicas a la I+D, entre otras cosas mediante la creación de una plataforma digital única.
• Cerrar las brechas de competencias mediante ofertas de formación más accesibles, procedimientos simplificados y una mayor divulgación, de modo que las pymes puedan invertir sistemáticamente en la mejora de las competencias y el reciclaje profesional de su personal.

Cuando se combinan, estas iniciativas pueden ayudar a las empresas más pequeñas a desarrollar todo su potencial. Incluso modestas ganancias de productividad en miles de pymes se traducirían en efectos agregados considerables y una convergencia sostenida de los ingresos.

Gráfico 2. A pesar de mejoras recientes, la productividad laboral se mantiene por debajo del promedio europeo

Nota: En el panel B, los cinco países con mejores resultados para las grandes empresas excluyen a Irlanda y Noruega, donde la productividad laboral supera los 416 000 USD en 2023.
Fuente: Estadísticas de niveles de productividad de la OCDE; Estadísticas estructurales de empresas de la OCDE.

Aprovechar el potencial de trabajadores mayores y migrantes

La urgencia del reto de la productividad en España se hace aún más evidente cuando se tiene en cuenta la demografía. El envejecimiento de la población y las bajas tasas de empleo entre los trabajadores de más edad (Gráfico 3) pueden reducir la oferta de mano de obra, ralentizar el crecimiento potencial y aumentar las presiones fiscales, a pesar de los vientos favorables que ha supuesto el aumento de la migración en los últimos años. España se enfrenta a una de las transiciones demográficas más pronunciadas de la OCDE, con un aumento previsto de la tasa de dependencia de las personas mayores de alrededor de 41 puntos porcentuales entre 2024 y 2054. Sin embargo, estos retos encierran un potencial sin explotar que puede convertirse en beneficio si se adoptan medidas decididas:

• Reformar las ayudas por desempleo no contributivas para mayores de 52 años, que actualmente funcionan como una jubilación anticipada de facto. Esto puede abordarse limitando la duración, restringiendo la acumulación de pensiones únicamente a la fase de seguro de desempleo, introduciendo la comprobación de recursos económicos y reforzando los requisitos de activación.
• Prolongar la vida laboral alineando más estrechamente los incentivos de jubilación con la mayor esperanza de vida, al tiempo que se mejoran las condiciones de trabajo y las opciones de formación para los trabajadores de más edad, por ejemplo, mediante bonos de formación individuales cofinanciados con los empleadores.
• Aprovechar mejor la migración. Los trabajadores nacidos en el extranjero ya representan una gran parte de la creación de empleo reciente, pero muchos están sobrecalificados para sus puestos de trabajo. Simplificar y agilizar el reconocimiento de títulos y hacer que los canales de migración respondan mejor a las necesidades del mercado laboral aumentaría tanto la eficiencia como la equidad.

Gráfico 3. Elevar las tasas de empleo de los trabajadores mayores es crucial para abordar el reto demográfico de España

Tasas de Empleo por edades, %, 2024

Fuente: Estadísticas de la OCDE sobre la población activa.

El resultado final

El crecimiento económico reciente de España ha sido sólido. Para mantener este impulso, es necesario cambiar el enfoque de la creación de empleo al crecimiento sostenido de la productividad. Las prioridades políticas deben seguir empoderando a las pymes mediante una mejor financiación y una menor burocracia, activar a los desempleados de más edad, prolongar la vida laboral y aprovechar el talento de los inmigrantes. España tiene ahora una oportunidad para impulsar las reformas. Las decisiones que se tomen en esta fase determinarán si la resiliencia actual se convierte en la convergencia del futuro.

Referencias:

OECD (2025), OECD Economic Surveys: Spain 2025, OECD Publishing, Paris, https://doi.org/10.1787/abc5c435-en.

By Aida Caldera, Claudia Ramírez and Dimitris Mavridis, OECD

Spanish version

Since the pandemic, Spain’s economy has grown robustly and faster than most peer countries in the Euro Area (Figure 1). Growth has been supported by strong investment, particularly public investment, rising exports in services and a rapid expansion of the labour force, as many migrants, mainly from Latin America, have integrated quickly into work. Employment is growing across sectors, while unemployment dropped from around 15% in 2021 to 10.5% in September 2025, although it remains the highest in the European Union. Temporary contracts—long Spain’s vulnerability— have fallen from over 25% to roughly 16% in the three years after the 2021 labour market reform.

Beneath these encouraging headlines a productivity challenge threatens to undermine Spain’s long-term prosperity, as highlighted in the recently released 2025 Economic Survey of Spain. Sustained growth and income convergence with other OECD peers depend on accelerating productivity growth and harnessing untapped resources.

Figure 1. GDP growth has surpassed European peers recently

Gross domestic product, volume, seasonally and calendar adjusted data, index 2019Q4 = 100

Source: Eurostat.

The productivity challenge

Spain is creating jobs faster than most of Europe, and productivity per worker has grown since 2022, notably in  commerce, transport, and hospitality. Despite this improvement, GDP per hour worked in Spain was still 7% below the EU average in 2024 (Figure 2, Panel A). This productivity shortfall isn’t confined to one lagging sector—it affects tradable and non-tradable activities alike, as well as firms of all sizes.

GDP growth will remain robust at 2.9% in 2025, 2.2% in 2026 and 1.8% in 2027, as the expansion of tourism normalizes, and immigration flows moderate. To sustain this growth momentum, and accelerate income convergence, strengthening productivity growth will be key.

The SME opportunity

Small and medium-sized enterprises lie at the centre of Spain’s productivity challenge, and they are equally central to overcoming it. SMEs make up 99% of all Spanish firms and employ nearly two-thirds of the workforce, placing them at the centre of the country’s economic engine. Yet, compared with their counterparts in peer countries, Spanish SMEs tend to be smaller, grow more slowly, and operate at significantly lower productivity levels than OECD top performers (Figure 2, Panel B). These gaps reflect the tighter financing constraints SMEs face, their lower rates of innovation, and the disproportionate regulatory and compliance burdens they bear relative to SMEs in many other European economies.

Aware of these challenges, Spain has launched an ambitious SME agenda backed by the Recovery, Transformation and Resilience Plan, which allocates about 40% of the funds in grants to entrepreneurship, digitalisation, and internationalisation. Yet, more can be done to unlock SME potential:

• Improving access to finance by strengthening market-based funding channels and connecting small firms with capital market participants, while raising awareness among smaller businesses of available non-bank financing options.
• Streamlining regulation and administrative procedures costs that weigh heaviest on smaller firms, including phasing-in regulatory thresholds that lead to sudden increases in compliance costs when firms grow.
• Simplifying application and reimbursement procedures for R&D public support, including by creating a “one-stop-shop” digital platform.
• Closing skills gaps through more accessible training offers, simplified procedures and better outreach so SMEs can systematically invest in workforce upskilling and reskilling.

When combined, these initiatives can help smaller firms realize their full potential. Even modest productivity gains across thousands of SMEs would translate into sizeable aggregate effects and sustained income convergence.

Figure 2. Despite recent improvements, labour productivity remains below EU

Note: In Panel B, 5 best performers for large firms excludes Ireland and Norway where labour productivity exceeds 416,000 USD in 2023.
Source: OECD Productivity levels Statistics; OECD Structural Business Statistics.

Harnessing the potential of older workers and migrants

The urgency of Spain’s productivity challenge becomes even clearer when demographics enter the picture. An ageing population and low employment rates among older workers (Figure 3) risk reducing labour supply, slowing potential growth, and increasing fiscal pressures, despite supportive tailwinds from rising migration in recent years. Spain faces one of the steepest demographic transitions in the OECD, with the old-age dependency ratio projected to rise by about 41 percentage points between 2024 and 2054. Yet, within these challenges lies untapped potential that can be turned into gains if bold responses are undertaken:

• Reforming non‑contributory unemployment assistance for over‑52s, which currently acts as a de facto early retirement. This can be addressed by limiting duration, restricting pension accrual to the unemployment insurance phase only, introducing means‑testing and strengthening activation requirements.​
• Extending working lives by aligning pension incentives more closely with longer life expectancy, while improving working‑conditions and training options for older workers—for example via individual training vouchers co‑funded with employers.​
• Making better use of migration: foreign‑born workers already represent a large share of recent job creation, but many are overqualified for their jobs. Simplifying and speeding up degree recognition and making migration channels more responsive to labour‑market needs would raise both efficiency and equity.

Figure 3. Raising employment at older ages is central to meet Spain’s demographic challenges

Employment rates by age, %, 2024

Source: OECD Labour force statistics.

The bottom line

Spain’s recent economic performance has been strong. Maintaining this momentum requires shifting gears from job creation to sustained productivity growth. Policy priorities should continue to empower SMEs through better finance and less red tape, activate the older unemployed, extend working lives, and unlock migrant talent. Spain now has a window of opportunity to push ahead with reforms. The choices made in this phase will determine whether today’s resilience becomes tomorrow’s convergence.

References:

OECD (2025), OECD Economic Surveys: Spain 2025, OECD Publishing, Paris, https://doi.org/10.1787/abc5c435-en.

Senior policymakers, ministers, academics and experts gathered in Montevideo on 17 and 18 November for the IMF–OECD High-Level Conference “Making Reforms Happen in Latin America”, an event dedicated to discussing how to advance reforms across the region.

The event highlighted both the region’s significant achievements and the structural challenges that continue to constrain growth.

Despite meaningful progress in poverty reduction, education access and macroeconomic stability, Latin America’s GDP growth has averaged only 2.3% since 2000 among OECD members and accession countries in the region—less than half the pace of emerging Asia.

Latin America’s growth underperformance largely reflects weak productivity. Strengthening productivity and unlocking private investment will require bold, sustained structural reforms, in line with  OECD’s Economic Surveys and the Foundations for Growth and Competitiveness framework. Main take-aways of the conference were:

Labour markets: reducing informality and strengthening skills

Discussions underscored that persistent labour market challenges—high informalitygender participation gaps, and skills mismatches—remain major barriers to inclusive growth.

Speakers highlighted the need to:

• modernise social protection financing to strengthen formalisation incentives
• reduce non-wage labour costs, particularly for low-income workers
• improve active labour market policies
• better align education and training with economic transformation

Examples such as Costa Rica’s efforts to increase the supply of relevant skills  to underpin its investment strategy illustrated how coordinated policies can support better jobs and productivity gains.

Tax systems: broader bases, stronger institutions

The tax session emphasised that Latin America requires tax systems that are fairer, broader-based, and more supportive of productivity and formalisation.

Key priorities included:

• reducing inefficient tax expenditures, particularly in VAT
• strengthening tax administration and state capacity
• simplifying tax systems to improve compliance and investment climate

Brazil’s recent VAT reform showed how consensus-building and predictability can make ambitious changes feasible.

Competition and regulation: a foundation for productivity

Participants stressed the need to improve competition and regulatory quality, central pillars of the OECD’s Foundations for Growth and Competitiveness flagship.

Priority areas included:

• simplifying business creation and licensing
• advancing digital one-stop shops
• strengthening governance of state-owned enterprises
• opening markets to foster private investment

The political economy of reform: building trust and long-term commitments

Across several sessions—including contributions from Andrés Velasco, Mariano Tommasi and Omar Licandro—a key message emerged: many constraints to reform are political, not technical.

Speakers highlighted the importance of:

• capable and credible institutions
• clear long-term strategies
• cooperation across ministries
• strong communication that links reforms to improved public services

Reforms are more likely to endure when supported by broad coalitions and sustained political commitment.

A shared commitment to stronger, more inclusive growth

The OECD will continue working with governments across Latin America to support the design and implementation of reforms that strengthen productivity, competitiveness and social inclusion.

Related documents

IMF-OECD Event Webpage

Opening remarks by the Secretary General of the OECD

By Claudia Ramírez Bulos and Aida Caldera Sánchez, OECD

In 2024, a woman working full-time in the average OECD country took home just 89 cents for every dollar earned by a man. But the picture varies significantly by country: in South Korea, women earned 29% less than men, in Japan 22%, while in Italy and Lithuania the difference was closer to 4% (Figure 1). Despite these disparities, one thing is clear: reaching equal pay between men and women is still a pending job across OECD countries.

This picture also emerges clearly in OECD Economic Surveys, which track country-specific progress on gender equality as part of their broader assessment of labour markets and growth. From Germany to Japan, from Korea to Spain, the Surveys show that persistent pay gaps reflect not only individual choices, but structural barriers that limit women’s opportunities to participate fully in the labour market.

Figure 1. The gender wage gap remains large in most OECD countries

Difference in median full-time earnings between men and women, % of the level for men, 2014 and 2024

Note: The data for 2014 refer to 2013 for Chile. The data for 2024 refer to 2023 for Austria, Chile, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, the EU-27, and the OECD. The data for 2024 refer to 2022 for Belgium, Iceland, Israel, Switzerland. For Luxembourg the latest data refer to 2020 (0.4); for Türkiye the latest data refer to 2018 (10.0).
Source: OECD Gender wage gap statistics.

Why equal pay matter

Equal pay isn’t just about fairness, it’s about unlocking economic potential. Paying women fairly for equal work drives higher workforce participation, fuels economic growth, and helps lift families out of poverty. OECD Economic Surveys consistently underline that more equal labour markets are also more productive. Closing today’s gender pay gap builds tomorrow’s gender pension equity, ensuring women enjoy the same financial security in retirement as men.

What is behind the wage gap between men and women?

The gender wage gap reflects unequal responsibilities and unequal opportunities. OECD analysis shows that three-quarters of the gap comes from men and women with similar qualifications being paid differently within the same firm, often reflecting differences in tasks and responsibilities, or simply discrimination. The remaining quarter reflects the tendency for women to be clustered in lower-paid firms and industries such as care, health and education, while far fewer make it into high-paying, fast-growing fields like information, communications and technology (Figure 2)  (OECD, 2021_[1]).

Economic Surveys highlight additional structural barriers:

• In Germany, high marginal tax rates on second earners, often women, discourage full time work (OECD, 2025_[2]).
• In Japan, the Surveys stress that limited uptake of parental leave by fathers and unequal career progression for women slows efforts to close the gap (OECD, 2025_[3]).
• In Korea, pay transparency and stronger enforcement of anti-discrimination laws are flagged as priorities to tackle one of the largest gender pay gaps in the OECD (OECD, 2024_[4]).

These structural obstacles are compounded by women still bearing a disproportionate share of unpaid household and care work — about four hours a day on average in OECD countries, twice as much as men (Figure 3), leaving less time for paid work, training, or promotions. Also, women’s greater likelihood of working part-time or fewer hours (voluntary and involuntary) limits their experience, career advancement, and access to higher-paying jobs. Hence women not only earn less per hour worked but work less hours on average. 

Figure 2. Fewer women work in high-paid jobs than men

ICT specialists and users in their job by gender, % of all jobs, 2022

Source: OECD Going Digital Toolkit gender indicators.

Figure 3. Women assign more time to unpaid household and care work than men

Average time spent by women on unpaid care and domestic work, female to male ratio

Note: “Unpaid care and domestic work” includes routine housework and care for household and non-household members.
Source: OECD Time use database 2024.

Progress and policy lessons

The gender pay gap has narrowed by around three percentage points across the OECD in the last decade (Figure 1), thanks to reforms in education, labour market and social policies. OECD Economic Surveys show how tailored policy packages deliver results.

• Austria reduced its gap through a mix of measures that strengthened pay transparency and reporting laws, reinforced equal treatment and anti-discrimination legislation, and supported women with mentoring programs and initiatives to balance family and work responsibilities — all while encouraging more women to take on leadership roles.
• Spain has also made significant progress, reducing its pay gap by 5.3 points over the past decade. This improvement reflects higher labour market participation, more women moving into full-time roles and higher-paying industries, and the implementation of stronger pay transparency rules to target gender discrimination, which apply to companies with more than 50 employees.
• Australia narrowed its gap through expanded parental leave, subsidised childcare, growth of more flexible work arrangements, wage setting reforms and mandatory pay reporting.

These cases illustrate that progress is possible, but also that achieving pay equity requires a comprehensive approach that tackles barriers at home and in the workplace.

The road ahead

A consistent message across OECD Economic Surveys is that progress requires coordinated action on childcare, family leave, tax design, and workplace practices (Gonne and Trincão, 2024_[5]):

• Expanding affordable childcare, improving shared and flexible parental leave.
• Reforming tax and benefit systems to remove disincentives to work for second earners, often women.
• Making fair wage-setting practices including mandatory pay transparency policies, requiring employers to publish gender wage gaps and giving workers the right to know what colleagues in comparable roles earn the norm.
• Supporting women’s access to leadership and decision-making roles such as temporary quotas, mentorship programs, and women’s networks.
• Awareness campaigns and data collection to monitor, evaluate, and improve the effectiveness of policies.

Equal pay will not come automatically. It requires deliberate policy action, sustained monitoring, and a commitment to use all the available talent to strengthen economies and societies.

OECD Economic Surveys will continue to track country-specific progress, helping governments design and implement reforms ensuring that equal pay is not only a principle, but a reality.

References

By Nikki Kergozou and Lilas Demmou, OECD.

South Africa, under the Presidency’s Operation Vulindlela, has embarked on bold reforms to address key obstacles to economic growth. Keeping this reform momentum is critical: GDP growth has averaged only 0.7% per year over the past decade. The persistently sluggish pace of GDP growth has failed to significantly raise GDP per capita, expand labour market participation, or improve living standards for the majority of South Africans. The economy’s high emissions intensity presents an additional challenge, as renewed growth may amplify environmental pressures.

In this context, the new 2025 OECD Economic Survey of South Africa (OECD, 2025) contains four main messages:

1. The macro-economic policy framework needs to be strengthened to make the economy more resilient.
2. Transforming the electricity sector to ensure energy security is vital for economic growth and would, in addition, facilitate the green transition.
3. Greater inclusion of South Africans in the labour market is essential for social cohesion and poverty reduction.
4. The prospect of higher growth requires speeding up reforms to reduce emissions.

An enhanced macro-economic framework is a prerequisite for stronger sustainable growth. South Africa’s 3-6% inflation target is high and its mid-point is well-above that of other major trading partners. Lowering the inflation target and considering reducing the band around it would help achieve lower inflation and support competitiveness. Public debt has surged from 31.5% of GDP in 2010 to a projected 77% in 2025 (National Treasury, 2025) and rising debt-servicing costs of around 5% are squeezing fiscal space, limiting the government’s capacity to finance social programmes and public investment. Stricter spending controls through reinforced spending rules, and improved governance would help improve the fiscal position and eventually reduce debt. Enhancing the efficiency of tax services, while raising value-added and property taxes, would also contribute to increase revenue collection.

A key structural reform to ensure that growth can be higher in a sustainable way is to ensure that electricity provision is sufficient for businesses to operate. Power outages, or “loadshedding” were estimated to have reduced economic growth by 1.5 percentage points in 2023 (SARB 2024). In addition to directly reducing efficiency, a loss of confidence in the electricity system weakens incentives to invest and deters new market entrants. Significant progress has been made but a lot remains to be done to put electricity outages behind us. Priority should be given to establishing a competitive wholesale electricity market, expanding the transmission grid, and improving municipality’s capacities to deliver electricity effectively. Reforms to municipal management and financing should prioritise earmarking electricity revenues to reduce cross-subsidisation, enhancing property tax collection and exploring distribution concessions.

Many South Africans struggle to find work: the country has the lowest employment rate and the highest unemployment rate among G20 economies. Reforms are needed to help firms create more jobs and to also help workers better connect with job opportunities. Restrictive regulations constrain firms’ ability to enter the market and expand, limiting job creation. Urban sprawl and insufficient public transport lead to lengthy, expensive commutes that pose challenges for workers to connect with employment. Promoting densification, and prioritising housing near public transport and development corridors would help.

As reforms leading to higher growth would put upward pressure on greenhouse gas emissions, South Africa will face additional challenges in meeting its climate goals. In addition, the country is highly vulnerable to the changing climate. A greener economy requires higher carbon prices, an enhanced policy framework for faster implementation of policies, and improved public transport so that people use their cars less often. In parallel, adaptation to climate change needs to be accelerated, notably by reducing the severe under resourcing of municipalities, who have a key role to play in climate policies.

References

• OECD (2025), OECD Economic Surveys: South Africa 2025, OECD Publishing, Paris, https://doi.org/10.1787/7e6a132a-en.
• SARB (2024), “Monetary Policy Review, October 2024”.
• National Treasury (2025), Budget Review 2025.

Por Jens Arnold, Aida Caldera, Priscilla Fialho, Paula Garda, Alberto González Pandiella, Michael Koelle, Alessandro Maravalle, Dimitris Mavridis, Claudia Ramírez y Adolfo Rodriguez-Vargas, OCDE.

El contexto global, marcado por una alta incertidumbre política y fragmentación, plantea nuevos desafíos para América Latina, pero también abre nuevas oportunidades para fortalecer su competitividad y reducir vulnerabilidades.

Se espera que el PIB en América Latina crecerá 2.1% en 2025 y 2% en 2026, lo que refleja una desaceleración generalizada en la región. Estas cifras son más bajas que las previstas a fines del año pasado y se sitúan por debajo del promedio de otras economías emergentes. Aunque se espera una fuerte recuperación en Argentina, el crecimiento se mantiene débil en la mayoría de los países, con revisiones a la baja para Brasil, México y Colombia (Tabla), en un contexto generalizado de una débil demanda externa y la alta incertidumbre.

Cuadro. Perspectivas económicas para los países de América Latina

Nota: América Latina 7 es la media ponderada por el PIB a valores de paridad del poder de compra de los 7 países en la tabla para el PIB. América Latina 6 es la media simple de los países incluidos en el cuadro para la inflación excluyendo a Argentina.
Fuente: OCDE Perspectivas Económicas No. 117, junio de 2025.

La desinflación avanza, pero persisten las presiones inflacionarias. La inflación se mantiene por encima del objetivo en muchos países. En cambio, Argentina ha logrado avances significativos gracias a una combinación de consolidación fiscal y una política monetaria más restrictiva. Con la excepción de Argentina y Brasil, los bancos centrales de la región deberían continuar con su flexibilización monetaria prudente y gradual para asegurarse que la inflación se acerque al objetivo, manteniéndose alerta ante riesgos de salidas de capitales y nuevas presiones inflacionarias.

Los riesgos para las perspectivas son a la baja. Un aumento de los aranceles comerciales y menor dinamismo al previsto en socios comerciales clave podría debilitar aún más las exportaciones y presionar a la baja los precios de las materias primas. Los costos comerciales podrían ralentizar más de lo esperado la desinflación en las economías avanzadas y prolongar tasas de interés globales más altas. Una elevada deuda pública y unas condiciones financieras globales más restrictivas de lo previsto, podrían retrasar la tan necesaria inversión. Si se intensifican las salidas de capital, los bancos centrales podrían tener menos margen de maniobra para flexibilizar la política monetaria.

Una agenda de competitividad para tiempos inciertos

En este complejo entorno global, la región necesita más que nunca mejorar sus políticas domésticas. Un área donde es posible avanzar, y urgentemente necesario, es en competitividad, comercio e inversión. Estas no son prioridades nuevas, pero los cambios globales en el comercio, las cadenas de suministro y la transición hacia economías más sostenibles aumentan su relevancia estratégica. Los países que ofrezcan estabilidad institucional, apertura y baja carga administrativa estarán mejor posicionados para atraer inversión y expandir sus mercados.

Mejorar los procedimientos aduaneros representa una oportunidad clara. Según los Indicadores de Facilitación del Comercio de la OCDE, América Latina aún enfrenta altos costos comerciales debido a procedimientos aduaneros complejos, inspecciones redundantes y poca coordinación entre agencias fronterizas (Figura). Hay amplio margen para mejorar el procesamiento, levante y despacho de mercancías, en particular mediante una mayor automatización y una mejor coordinación entre las agencias aduaneras, sanitarias, tributarias y otras agencias fronterizas. Medidas prácticas como la cooperación entre agencias de distintos países en la frontera, la agilización de los procesos judiciales y una mayor digitalización pueden beneficiar a los exportadores, especialmente a las pequeñas empresas, y atraer inversión. Además, estas medidas reducen los costos de operar formalmente, lo que incentiva a más empresas a salir de la informalidad.

Figura. Las políticas de facilitación del comercio pueden mejorarse en América Latina

2 = Mejor desempeño

Nota: Disponibilidad de la información y uso de consultas públicas es la media de los indicadores de la facilitación del comercio (TFI, por sus siglas en inglés) A y B. Eficiencia del marco jurídico es la media de los indicadores TFI C y D. Simplicidad de los procedimientos es la media de los indicadores TFI F, G y H. Eficacia de las agencias fronterizas es la media de los indicadores TFI I, J y K. ALC-7 es la media de Argentina, Brasil, Chile, Colombia, Costa Rica, México y Perú.
Fuente: Estadísticas sobre los Indicadores de Facilitación del Comercio de la OCDE (TFI, por sus siglas en inglés).

La facilitación del comercio debe ir acompañada de reformas más amplias que fomenten la productividad. Impulsar la competitividad de las exportaciones y la productividad empresarial también requiere un entorno empresarial más dinámico, una mayor competencia doméstica, un mejor acceso a la financiación, más capacitación y capacidad de innovación. Estas reformas se refuerzan mutuamente: las empresas más productivas tienen mayor probabilidad de exportar, invertir y formalizarse.

El fortalecimiento de la integración regional sigue siendo relevante en América Latina, especialmente en un mundo donde las cadenas de valor están cambiando y los centros regionales cobran mayor importancia. El enfoque debe centrarse en la cooperación: mejorar la cooperación entre organismos fronterizos, el reconocimiento mutuo de normas, el intercambio de datos, los sistemas interoperables y el reconocimiento de estándares técnicos comunes. La región también cuenta con un potencial sin explotar en el comercio de servicios, gracias a idiomas compartidos y husos horarios similares; sin embargo, el comercio interregional de servicios sigue siendo bajo en comparación con los estándares mundiales.

América Latina debe adoptar una visión más orientada hacia el exterior. Acuerdos comerciales como el de la UE-Mercosur, y la participación en marcos plurilaterales como la Alianza del Pacífico o el CPTPP pueden ayudar a diversificar mercados de exportación, atraer inversión, fortalecer la participación en las cadenas globales de valor y aprovechar nuevas tecnologías. Sin embargo, para aprovechar al máximo los beneficios de estas iniciativas, los países deben mejorar su capacidad de implementación y garantizar la coherencia entre las políticas comerciales, de inversión y regulatorias.

América Latina cuenta con ventajas reales: vastas reservas de minerales críticos, abundante energía renovable, una fuerza laboral joven y cada vez más cualificada, y proximidad a mercados clave. Al impulsar reformas concretas que mejoren la competitividad, reduzcan las barreras comerciales y atraigan inversión de calidad, la región puede convertir los desafíos actuales en oportunidades y sentar las bases para un crecimiento más sólido y resiliente.

Referencias:

OECD (2025), OECD Economic Outlook, Volume 2025 Issue 1, OECD Publishing, Paris, doi – Reporte completo en inglés con las proyecciones macroeconómicas, los principales desafíos estructurales e información detallada por país.

Perspectivas económicas de la OCDE para países de América Latina, Junio 2025.

Información detallada por país: Argentina | Brasil | Chile | Colombia | Costa Rica | México | Perú

By Pierre-Alain Pionnier

Lithuania’s population is expected to decline by 20% and its working-age population by 30% over the next 25 years (Figure 1). Few countries will face such a large demographic shock. This calls for policy responses across different areas, including fiscal and labour market policies, as explained in the 2025 Economic Survey of Lithuania. 

Figure 1. Lithuania will face a large demographic shock

Change in the working-age population (20-64 years old), %, 2022-2050

Ageing-related expenditure is set to increase by 3.6% of GDP by 2045, most of it related to the financing of public pensions. At 37% of GDP in 2023 Lithuania’s public debt is one of the lowest in the OECD, but simulations show that it could increase rapidly due to ageing-related costs.

Unfortunately, there is not much that Lithuania can do to contain the expected increase in pension spending, at least in the short term.

The statutory retirement age is currently around 64, similar to the OECD average, and will increase to 65 in 2026 for both men and women. Significant disparities in life expectancy between men and women and across socio-economic groups make further increases in the retirement age difficult. Lithuanian men have one of the lowest life expectancies in the OECD and enjoy relatively short retirement periods. Even in an optimistic scenario, fiscal savings that could be obtained from linking the retirement age to life expectancy would be limited in Lithuania.

Adjusting pension benefits could in principle provide a way to improve the financial sustainability of the pension system. But pension replacement rates, which measure pension benefits relative to pre-retirement wages, are already the lowest in the OECD and old-age poverty is high (25%). This severely limits the scope for savings through benefit adjustments.

Ensuring fiscal sustainability will therefore require creating additional fiscal space outside of the pension system. Better spending efficiency can help to improve fiscal outcomes. For example, Lithuania has a larger public sector than other OECD countries and available estimates suggest that wages in the public sector are around 10% higher than in the private sector. Moreover, Lithuania’s fiscal revenues are comparatively low (Figure 2). This provides scope to increase taxes to contribute to the financing of ageing-related expenditure. One case in point is property taxes, which are among the taxes that are least detrimental to economic growth but also largely underused in Lithuania. A large shadow economy is another unexploited source of fiscal revenues. This shadow economy reduces revenues from value-added taxes. Further reducing the use of cash in the economy and reducing the tax wedge for low-income earners to make formal work more attractive could help, and the resulting revenue losses could be compensated by increasing income taxes for higher incomes.

Figure 2. Property tax revenues could be increased to strengthen fiscal sustainability

Structure of tax revenues, % of GDP, 2023

Bringing more people into the labour force would attenuate the impact of the demographic shock on the labour market.

Despite existing labour shortages in many sectors, the employment gap between higher- and lower-skilled workers is high in Lithuania. The creation of learning accounts for training courses in 2024 is a step in the right direction. If it turned out that current funding is insufficient to make a significant difference, targeting could be increased towards the groups that are most in need of training.

Increasing the employment prospects of older-age workers will also require improving their health. Poor health conditions are partly related to preventable diseases and behavioural factors such as poor diets, high alcohol consumption and low physical activity. Regulations and taxes have a key role to play by limiting the affordability of harmful substances.

Immigration is another way to mitigate labour shortages. Simulations presented in this Survey show that extending the positive net migration inflows that were observed just before the outbreak of the war in Ukraine would halve the impact of the demographic shock on the Lithuanian economy. Residence permits for non-EU workers could be made more attractive. With 1.3 million persons of Lithuanian descent living abroad, return migration also has a significant potential. Since migrants of Lithuanian origin may be easier to integrate, outreach towards the diaspora could be strengthened.

Visit the OECD’s Lithuania Economic Snapshot page for further information.

References:

OECD (2025), OECD Economic Surveys: Lithuania 2025, https://doi.org/10.1787/4abf1ea5-en, OECD Publishing, Paris.