There is a specter that wanders every time economic experts debate economic policy at this time. And, although few dare to name it, it is that of the former British Prime Minister Liz Truss. Her sudden tax cut, which she put in place when she became Downing Street in 2022, cost her not only the punishment of the markets, but the job itself.
When examining the case of Spain, when the general elections are just a few days away and the candidates are making promises, the Esade experts, in their Economic and Financial Report, prepared with the support of Banc Sabadell, which presented this Thursday, they advised against the option of lowering taxes. The public aid plan, the revaluation of pensions and the war in Ukraine have increased the bill for the public debt and the experts gathered by Esade believe that it is necessary to move towards fiscal consolidation.
For Toni Roldán, director of EsadeEcPol, it is necessary to transmit confidence to the markets that some adjustment is going to take place, otherwise the markets would be scared and they would have to pay more to finance themselves in international markets. Professor Josep Maria Comajuncosa also considers that there are European links that must be respected and fulfilled.
“In this context, it is absolutely necessary to normalize fiscal policies with the aim of reducing public deficits and debt levels, particularly now that unconventional monetary policies no longer keep the costs of this debt low. This is crucial to free up more fiscal space, since in the future it may be necessary to increase certain social items, in investments for the technological transition or for the fight against climate change”, the report states.
Esade estimates that GDP will register an expansion of 0.6% in the second quarter compared to the period between January and March, an advance that means that the economy remains “resilient” despite the persistent fiscal imbalances, “at least at the moment”. For the year as a whole, growth could reach 2% of GDP.
Even so, the outlook for the rest of the year is highly uncertain. Private consumption has experienced a weaker profile, suffering a contraction of more than 1% in the first three months of 2023. The pull of the Spanish economy has been based in particular on exports. Faced with a global slowdown, “the factors that are maintaining the pace of the Spanish economy could “disappear”, they affirm.
