The Central Government undertakes with the European Commission to accelerate the reduction of the ratio of the public deficit to the gross domestic product (GDP) until leaving it at 3% in 2024. This is reflected in the Stability Program 2023-2026 , which the Ministry of Economic Affairs finalized yesterday afternoon and which it plans to send to Brussels throughout the day today. The new fiscal policy is more ambitious than the one planned so far, as it advances the 3% commitment by a year and may allow Spain to avoid the opening of an excessive deficit procedure. The growth of income is the key for the Executive to be able to assume this commitment to the sustainability of public finances and, therefore, to be able to save possible cases of excessive deficit.
After the blow caused by the pandemic, the fiscal plan that Spain promises to adopt foresees that the deficit for all public administrations will reach 3.9% at the end of this year, the aforementioned 3% during next financial year, 2.7% in 2025 and 2.5% in 2026. With these objectives, the national economy would reach a primary surplus in 2025. In 2020 the deficit was 10.1% and last year it closed with a lag of 4.8% on GDP, which was the largest decline in the historical series, excluding financial aid; measured in numbers, it was an adjustment of 49.5 billion.
The reduction of the public deficit is taking place, explains the Central Government, thanks to the growth of economic activity, the increase in tax collection and the creation of employment. Public revenues last year broke the record of the historical series reaching 255,500 million, 14.4% more than in 2021. According to the Tax Agency, these figures are due to the increase in employment ratios and the improvement of working conditions, which explain a historic rise in personal income tax income, up to 110,000 million. Inflation contributed five points to the improvement of financial resources and contributed to increasing VAT revenues to 82,500 million. The Treasury forecast is that the increase in income will gradually moderate in the coming years, but always maintaining a growth higher than the CPI forecast.
The public coffers have never been so full, and the income has been allocated to public aid and also to reducing the deficit. The Minister of Finance, MarÃa Jesús Montero, co-participant of the updated Stability Program, indicated yesterday that “what is beautiful and good is that for 2024 it is done [set the deficit at 3% of GDP] precisely without practice cutback policies, helping all the sectors that are in the worst situation and protecting the social majority of the country”.
The economic area of ​​the Government wanted to launch the message yesterday that Spain is committed to continuing to adjust its gap between income and expenditure when the fiscal rules are back in force, in 2024. A message that arrives in the middle of the debate on the new framework budget, which is being worked on in Brussels and which, according to the Commission’s first proposal, would provide for an adjustment policy for each country according to its debt.
The objective of the Spanish Government, as explained yesterday Thursday by the vice-president of Economic Affairs, Nadia Calviño, is to “reduce the ratio of deficit and debt to GDP as soon as possible”. “This is important news that confirms our Government’s strong commitment to fiscal consolidation so that we absorb the negative impact caused by the pandemic as soon as possible and continue on a path of sustainable growth in the coming years,” he said .
