September 25, 2020

Public debt rises by 32,000 million in June due to Covid and marks a new maximum



The debt of the public administrations as a whole registered in June a 2.5% increase compared to the previous month, by adding 32,087 million euros more as a result of the Covid-19 crisis, to a new historical maximum of 1,289,905 million euros. In this way, public debt remains above 100% of GDP, a value that already exceeded in May, according to data published this Tuesday by the Bank of Spain.

With respect to June of the previous year, public debt has increased by 6.8%, adding in one year 82,473 million euros compared to the 1,207 billion euros registered in June 2019. In this way, the ratio of public debt over GDP would have remained in June above 100% of GDP after having already overcome this barrier in the month of May.

This increase in debt in June is due to the increase in indebtedness of both the State, the autonomous communities, municipalities and Social Security, which have had to make an extra spending effort due to the impact of the coronavirus crisis, as a result of the establishment of the state of alarm on March 14 and the royal decrees approved to alleviate the crisis.

Specifically, the debt of the General Administration of the State marked all-time highs, along with that of Social Security, which is also at maximum, but debt also grew in autonomous communities and local corporations.

Thus, the state debt rose in June by 32,091 million euros compared to the month of May, up to a maximum of 1,153 billion euros, 2.8% more, and compared to the previous year it rose by 8.3%, adding more than 88,443 million in the last 12 months.

Meanwhile, the public debt of the autonomous communities also rebounded in June, although less than that of the State, with an increase compared to May of 2,773 million euros, 0.9% more, to 304,855 million. In one year, the regional debt has grown by 1.4%.

In turn, local corporations raised 2.5% its debt in June, up to 25,049 million euros, but presented a year-on-year reduction of 4.5%.

Finally, the debt of the Social Security administrations rose in June to 68,855 million euros (8,831 million more than the previous month), so it continued at a historical record. At a year-on-year level, it grew by 41.4%, adding 20,162 million euros in just one year.

This rise in debt is due to the loans that the State has granted to Social Security in recent years to guarantee the payment of pensions, whose monthly bill currently exceeds 9,800 million euros, but in the months in which there are pay extra, this is doubled.

According to the estimates of the Bank of Spain, in the more moderate scenario of GDP drop due to the Covid-19 crisis, the public debt ratio will rise to around 115% of GDP, while in the most adverse it could exceed 120% of GDP.

The public debt closed 2019 at 1.18 trillion, the equivalent of 95.5% of GDP, below the goal that the Government had set of 95.9% of GDP. For this year, the Government set a reduction goal to 94.65% of GDP, which, however, as a result of the Covid-19 crisis, has been updated until the estimate rises to 115.5% of GDP.

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