The Independent Authority for Fiscal Responsibility (Airef) has revised upwards its growth forecast for the national economy in 2024 from 1.7% to 2% of GDP, in line with the Government’s forecasts and following in the wake of the main national and international organizations. The main causes of this positive scenario are, for Airef, the better performance of the economy observed at the end of 2023. This carryover effect and the also optimistic evolution in the first quarter of 2024 explain this review, the president of the organization has assured. independent, Cristina Herrero. This improvement, however, has not led the Tax Authority to revise its medium-term growth forecast, which it maintains at 1.5% in 2028. It therefore estimates a slowdown in the national economy over the next few years. .
The supervisor maintains the same deficit forecasts for 2024 that he advanced in October. In this way, their scenario is that public administrations would close the year with a gap of 3% of GDP. The central administration has been the most compliant last year, managing to reduce the gap to 3.6%. Although complying with fiscal rules will not be difficult this year, Airef does foresee that the deficit will not fall below 3.2% during the following years. That is to say, it sees a worsening of the gap due, essentially, to the withdrawal of extraordinary taxes.
Airef has also highlighted that in 2023 there was a drop in defense spending, which allowed the State to achieve this reduction. Specifically, Ignacio Fernández-Huertas, director of the budget analysis division, explained that “if the budget execution of the special weapons programs is verified, an increase in spending is observed, but that spending is not transferred in terms of national accounting. ”. Thus, “in 2023 there will be a drop in military deliveries.” Specifically, Airef estimates that in 2023 Spain spent 1% of GDP on defense, about 2,000 million less than in 2022. The commitment is to reach 1.6% in 2026 and 2% in 2029.
The Tax Authority estimates, however, that there will be a rebound in military investment in 2024 which, added to the ruling of the Constitutional Court on the Corporate Tax (the Montoro reform), which will force the Treasury to make million-dollar refunds, will cause the deficit is not moderated in such an ambitious way.
The Airef has also highlighted that the autonomous communities will close the year with a deficit of 0.1%, failing to comply with the commitment to budget balance. Not all of them will be non-compliant. Those that will close with a delay are: Valencian Community, Murcia, Catalunya, Madrid and Castilla-La Mancha.
The supervisor has also estimated that the central administration, all the autonomous communities and 10 town councils would fail to comply with the spending limit this year recommended by the EU. They would close at 4%, when the commitment required is 2.6%. To converge towards budget stability, Cristina Herrero has advocated for the convening of a Conference of Regional Presidents to address this issue. The president of the Airef has stressed, however, that the consequences of this non-compliance are “none.”
Regarding debt, Airef estimates that it will close the year at 109.1% of GDP. In the medium term, the debt will remain at levels of 104% because, as explained by Cristina Herrero, the lower growth will not be able to continue reducing it. “We are certain that it will be necessary to make an adjustment” due to the “high debt ratio,” Herrero stated. The Airef has already warned that without extraordinary adjustments the debt at the end of this decade will once again begin an upward path due to the aging of the population.
Airef also sees uncertainty regarding the ongoing distribution of European funds. To this end, it has announced the publication of a tool to know the distribution of transfers.
