October 1, 2020

Public spending will account for more than half of the economy in 2020




He public spending in Spain it will skyrocket this year to 52% of GDP. This is how he collects it BBVA Research in its latest study, in which it warns that its weight on the economy will grow between ten and eleven percentage points. More than half of the income generated in our country will have its reason for being, for the first time, in the public coffers.

«This increase is justifiable due to the atypical situation that the Spanish economy is going through due to Covid-19»Says the document. However, there is a risk that this anomaly will become chronic for a few years. The entity’s research service considers that these high levels of spending could continue to occur in the future due to the coronavirus crisis. Faced with this, the institution claims to “demonstrate that the best use of public resources is being made.” Watch that 52% is translated into the real economy and is not just numbers.

BBVA Research also breaks down the items that caused this increase in relative terms. Of the 10 estimated points, he calculates that slightly less than half is explained by the decline in GDP; the increase in unemployment would be the culprit of a rise of between one and two points; and measures such as transfers of 17,000 million to the autonomies and incentives to ERTE will cause an increase of 3-4 percentage points.

Contained recovery

Looking ahead to the next few years, if there is no other lockdown, the economic recovery should pull spending down slightly. “If GDP growth is around 7% the following year, this factor alone would result in a 4 pp drop in public spending. On the other hand, the cost of ERTEs should be reduced, to the extent that the percentage of workers included in them is already decreasing considerably and the same incentives have been modified to boost activity, ”the report explains.

Against this background, BBVA Research emphasizes the need to approve some General State Budgets (PGE). It should be remembered that, to this day, those of 2018 that the Government of Mariano Rajoy elaborated continue to be extended. Not forgetting, either, the design of a plan to reduce the public deficit, which will also skyrocket in 2020.

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