The Independent Authority for Fiscal Responsibility (AIReF) increases the pressure for the Government to lower the economic forecasts of Spain in 2021. The director of the AIReF Economic Analysis Division, Esther Gordo, has indicated that a downward revision in the Gross Domestic Product growth to 6.6% compared to 8.2% that had been forecast for 2021. The Vice President of Economic Affairs, Nadia Calviño, has been sending messages this week about a downward modification of her growth forecasts economic for this year, ruling out a GDP increase of 7.2% that could reach 9.8% with European funds.
The director of AIReF’s Economic Analysis Division has explained that there are three reasons that justify the reduction of her forecasts. On the one hand, a poorer start to economic activity at the beginning of the year due to the third wave of the pandemic, which has been reflected in the fall in electricity consumption data and the slowdown in the labor market in the first quarter, despite the recovery experienced in March.
On the other hand, Gordo has added a delay in the normalization of tourist activity due to the fact that new waves of the pandemic may cause the imposition of mobility restrictions. According to the barometer prepared by the World Tourism Organization, the sector’s expectations of recovery are negative and delay the recovery to 2023. AIReF points out that in the summer months international tourism will be between 30 and 40% of a normal season while at the end of the year it will reach 60% or 70% of a normal year.
Finally, researchers from the tax authority have reduced the impact of European funds, which reduced the 2.7% increase in GDP that they forecast in October to 1.6%. Gordo explained that the difference is carried to 2022 and stressed that “with this reduction there is no doubt about the Government’s capacity to implement the Recovery Plan, but rather its multiplier impact is reduced since it is not executed at the beginning of 2021 and is delayed to the second half of the year. ”
7.6% GDP deficit in 2021
As a positive element, AIReF reduces the deficit to 7.6% of GDP in 2021, compared to the red numbers of the Public Administrations of 8% that it had forecast a few months ago. Ignacio Fernández-Huertas Moraga, director of the Budget Analysis Division, that the increase in the deficit is due to several factors ranging from the denominator effect on nominal GDP, which amplifies the drop in expenses and dampens the rise in income to the new Measures adopted to date represent an increase in the deficit forecast for 2021 of 1 point of GDP.
When detailing these Government actions, AIReF points to direct aid to the self-employed and companies approved in March, although they add that the reduction in the total cost of measures against COVID, which exceeds 4.3% of GDP in 2020 to 2.7% in 2021, and to the neutral effect of the Recovery and Resilience Plan.
On the other hand, they add that the impact of the revenue measures provided for in the PGE has been revised downwards due to the fact that the reduction of the diesel discount was not approved, to the exclusion of dairy products from the increase in VAT on beverages. sugary and sweetened and delays in the processing of new measures of environmental taxation and fight against fraud.
Despite this reduction, AIReF estimates that revenues will be 43.3% of GDP in 2021, slightly more than seven tenths compared to the previous report, due to the fact that VAT and excise duties suffer a slight decrease due to the impact macroeconomic and the delay in the parliamentary processing process, there is an increase of one tenth in the collection of personal income tax, an improvement in 3 tenths of the income from the Corporation Tax for the third installment payment and the positive closing of the prices in 2020 for retail drop in compensation of employees.