Spain closed 2021 with a deficit of 6.9%, some 18,000 million better than expected

The pandemic was a very hard blow to the Spanish public accounts. After having managed to close 2019 with a public administration deficit of 2.8%, 2020 shot it up to 11% -the highest in the entire EU- and 2021 still closed at 6.9%, according to INE data which were made public this Thursday. Still, they are 1.5 points less than expected by the Government.

Taking into account that the national GDP for 2021 is 1.2 trillion euros, that point and a half difference with respect to what is estimated by the Executive's accounts represents a margin of around 18,000 million euros, which will allow part of the Plan to be financed. National response to the war approved last Tuesday in the Council of Ministers.

In total, administrations had a deficit of 82,819 million euros, 28% less than the 115,200 million the previous year. The final data also improves the estimate made by the Bank of Spain last December, which placed the deficit at 7.5% of GDP.

Despite this good news for the Government, they are still very high figures that were expected to be recomposed after the pandemic but that now the war has blown up. Funcas' economists warn that this year the budget gap could be 5% and still 4.5% in 2023. The government's shock plan for the war - which includes 16,000 million in public aid between direct, tax cuts and ICO credits- will be a new challenge for the accounts.

But without a doubt those 18,000 million approximately of improvement with respect to the forecasts that the Executive had calm the waters. The Vice President and Minister of Economy, Nadia Calviño, already recognized this week that this new line of aid will have "a budgetary reflection" during the next few years, but she trusts that she will be able to manage the imbalances thanks to the fact that both the public debt and the deficit behaved in 2021 better than estimated. "This will give us capacity from the fiscal point of view to undertake the plan," she indicated Calviño.

His words came just a few hours after the governor of the Bank of Spain, Pablo Hernández de Cos, urged to avoid a generalized fiscal impulse to deal with the crisis, advocating "focused" responses in the most vulnerable sectors. "Our measures are in line with the recommendations of the central banks and other international organizations," Calviño insisted in response to the governor, recalling that the response to this crisis "cannot be a general cut in taxes that leads to a fiscal adjustment on the whole of the economy”.

By administrations, the deficit registered by Social Security stands out, which was 11,192 million euros at the end of 2021, equivalent to 0.9% of GDP, the lowest figure since 2013 and three tenths below the Government estimate (1 ,3%). This was due to a strong growth in income from contributions derived from the improvement in employment, according to data published by the Ministry of Social Security. It is the first time since 2013 that the system's deficit falls below 1%.