Public debt drops to 113.2% of GDP in 2022 but marks a new annual record

Public debt drops to 113.2% of GDP in 2022 but marks a new annual record

The public debt of the Public Administrations once again set an annual record at the end of 2022, exceeding 1.5 trillion euros, with a growth of 5.3% compared to the end of 2021. However, measured as a ratio over GDP, The indebtedness of the public administrations as a whole stood at 113.2% of the Gross Domestic Product (GDP), which is five percentage points less than the rate with which it ended in 2021 (118.3%) and two percentage points less than the government forecast (115.2), according to data published this Friday by the Bank of Spain.

GDP growth is what has allowed the public debt ratio to fall even though it continues to rise in absolute values. Its weight over GDP is what the European Commission looks at to check if the member countries comply with the fiscal rules, which have been suspended since the outbreak of the coronavirus epidemic, but which are intended to be reintroduced in 2024. If the same requirements, Spain will have an arduous road ahead to bring public debt to 60% of GDP. Now it is more than double the limit that the EU had imposed. Even so, it has already fallen from the maximum registered in 2020, when it reached 120.4% of GDP, partly due to the public aid approved to deal with covid-19 and partly due to the drop in GDP that year and of the incomes.

This debt of the Public Administrations is the one that is calculated according to the Excessive Deficit Protocol and is sent to the European Commission in the scope of the spring notification.

Another positive element is that the volume of public debt decreased in the fourth quarter of 2022 compared to the immediately previous quarter: between July and September the indebtedness reached 1,503,760 million euros while in December it fell to 1,502,543 million. In other words, 1,217 million less, which may not seem like much in these magnitudes and we will have to wait and see if the downward trend is confirmed.

By sectors

Central Government debt grew by 6.2% in the fourth quarter to 1.36 trillion euros, representing 102.4% of GDP. That of the Autonomous Communities is the one that increased the least, 1.4% to 317,000 million euros, 23.9% of GDP. And that of Local Corporations rose 4.3% to 23,000 million euros, 1.7% of GDP.

But all eyes are on the evolution of Social Security indebtedness, especially this week when the reform decree-law that will be processed as a bill was validated in Congress. A reform that increases the payment of contributions by businessmen, the self-employed and employees to cover the cost of the rise in pensions with the CPI. The sustainability of the Social Security system is the main debate. For now, one of the data that reflects the balance of the system continues to worsen. Social Security indebtedness stood at 106,000 million euros at the end of 2022, 9.3% higher than at the end of 2021 and represents 8% of GDP.