May 12, 2021

The Government worsens its deficit forecast for 2021 to 8.4% of GDP, 8,000 million more


MADRID

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The Government has worsened its deficit forecasts for 2021, before a year in which it will grow less and spend more. The Minister of Finance, María Jesús Montero, presented this morning the update of the fiscal table that contains the Stability Program from 2021 to 2024. If before she foresaw an unbalanced 7.7% of GDP, now this rises to 8.4%, that is, about 8,000 million euros more. Spain will no longer comply with the 3% limit of the Stability Pact this legislature, since the Treasury estimates that the gap will be 5% in 2022, from 4% in 2023 to decrease to 3.2% in 2024. The European Commission Yes, it has suspended the fiscal rules for 2020, 2021 and is now debating whether to extend it to 2022.

Refering to public debt, the also Government spokesperson has announced that the Executive expects public debt to fall from 120% of GDP to 119.5% in 2021. The Executive expected 117.4%, but when including Sareb’s assets in 2020, public liabilities jumped from 117% to 120%, derailing their previous estimates. For 2022, it predicts 115.1%, 113.5% in 2023 so that the path would continue to reduce to 112.1% in 2024.

In the words of Montero, after closing 2020 at 10.97% of GDP, this would be the second largest drop in deficit in the historical series in one year, mainly driven by the growth of the economy and the resistance of the collection, which has fallen less than in the previous crisis. The extension of the ERTE and the approval of direct aid to companies and more support measures, for 11,000 million, explain this worsening, together with the fact that the economy will grow less than the 9.8% expected in October by the Government.

The minister has indicated that the path does not incorporate any measure, nor reforms that affect tax collection or the pension system, which will include the Stability Program. Therefore, it is a forecast path in an inertial scenario.

The Condition will accumulate most of the deficit, with 6.3% of GDP compared to 7.5% in 2020. This is explained by transfers from the Central Administration to autonomous communities and Social Security. For their part, the regions will raise their imbalance from 0.2% to 0.7% of GDP, lower in any case than the reference index of 1.1%. Refering to Social SecurityBy transferring its non-contributory expenses to the State, its deficit drops from 2.6% to 1.5% of GDP.

Regarding the VAT of the autonomous communities, which claim a pending monthly payment of 2017, Montero opened the door to pay the regions the corresponding 2,500 million, after the Supreme Court agreed with Castilla y León, which appealed its part. «What applies for an autonomous community will be done for the whole. We will study the sentence in depth to see the scope it has, ”said Montero, who recalled that the State transferred 16,000 million unconditionally to the communities last year due to the Covid crisis and 13,000 this year. “We will see how and in what way we interpret this question”, has held.

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