May 14, 2021

Fitch maintains the note to Spain, but believes that it will not meet the deficit | Economy

Fitch maintains the note to Spain, but believes that it will not meet the deficit | Economy



The risk rating agency Fitch maintains the debt rating of Spain in remarkable low (A-) with stable outlook, but expresses doubts about The impact of the Budgets and the possibility that they can get ahead.

Fitch issued a report on Spain this Friday, hours after the government presented the draft Law on the General Budgets of the State of 2019, in which it refers to the draft that the Executive sent to Brussels in October and that advanced some of the measures contained in the Budgets. Without changes in fiscal policy, the agency forecasts that the deficit will only fall to 2.1% of GDP this year, above the current target of 1.3%.

With respect to the end of 2018, Fitch expects the deficit to fall to 2.7% of GDP, which will remove the country from the European procedure for non-compliance, although it points out that the reduction has been based on improving the economy and not in a structural adjustment. In fact, the agency justifies in the strength of the economy the decision to maintain the credit rating.

In its report, the agency forecasts a growth for the Spanish economy of 2.3% for 2019, one tenth of over the Government's forecast, which in the General State Budgets contemplates a progression of 2.2%. It also highlights that the dynamism of the economy is based on the pull of domestic demand, which is based on the process of generating employment, the recovery of the price of housing, favorable credit conditions and budgetary stimuli.

However, Fitch points out that budget uncertainty is compounded by the political cycle itself, since it does not rule out an electoral advance before the legislature runs out by mid 2020. It also warns that the political fragmentation of Parliament, which prevents carry out structural economic reforms, could be even greater if "the right-wing party" Vox replicates nationally its result in the elections of Andalusia.

It has also returned to alert of the high public indebtedness, of the high rate of unemployment and doubts about the political situation in Catalonia. On this, it ensures that tensions persist, but at a lower level than a year ago. The agency insists that the secession of this community from the rest of Spain is still not possible, which in its opinion has led to the limited economic impact of the political crisis.

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