The Tax Authority draws an economic panorama with dark clouds on the horizon, more than those it had set in its latest forecasts. After improving Spain’s growth estimates for this year in July, president of Airef, Cristina Herrero, warned today that public finances are in a “vulnerable” position. She has spoken clearly, without half measures. “The slowdown will occur with greater intensity and anticipation than we expected before the summer,” the supervisor’s top official has warned.
The Fiscal Authority’s concern about public finances focuses on Spain’s debt ratio, which still stands at 110%, in the current situation. “A scenario of rising interest rates puts us in a scenario” with more shadows than certainties, Herrero defended at a breakfast organized by the Nueva Economía Fórum in Madrid.
In its latest report, Airef raised the growth of the Spanish economy for this year to 2.3% and revised downward that of 2024 to 1.9%. At that time, the supervisor already warned that there were factors that would hinder the evolution of public finances: underlying inflation, the rise in gas and oil prices, the situation in China and the euro zone, and monetary policy. All this, added to the aforementioned new increase in interest rates, makes Herrero and his team conclude that the situation in the short and medium term is even more complex.
The public deficit is another of Airef’s concerns. According to their estimates, in 2023 it would be 4.1% and in 2024 Spain could reach the 3% ratio to comply with the commitment set by Brussels. But, as Cristina Herrero warned today, all of this “depends on two factors.” Firstly, the progressive withdrawal of aid measures to face the energy crisis, whose impact is one point of GDP, and that the autonomous communities moderate their spending. Airef supports the recommendation to gradually withdraw these generalized aid measures and, if any are maintained, to be with maximum focus on those who need it most.
The Tax Authority has shown its concern about the absence of short and medium-term tax planning. With a government in office awaiting a possible investiture of Pedro Sánchez and with a new regional and local political map after the May elections, Herrero has proclaimed that this fiscal planning will require consensus between all public administrations. The Airef recommends that the Ministry of Finance now set a reference rate when preparing the budgets of the administrations and has asked the department of María Jesús Montero to initiate an active dialogue with the autonomous communities so that the future can be met ” fiscal framework” without any problems.
In the absence of setting deficit objectives, the president of Airef has highlighted that the autonomous communities are beginning to prepare their budgets in budget balance. But that decision has its risks. According to Herrero, this would mean an increase in primary spending of 11%. It is also foreseeable that the resources of the financing system will be very positive in 2024. But the supervisor has asked for “responsibility” and is conveying this in specific meetings with the Treasury advisors of the autonomies.
Cristina Herrero wanted to leave, once again, a message towards her predecessor, the acting Minister of Inclusion, Social Security and Migration, José Luis Escrivá, and the pension reform. The president of Airef has stressed that “additional measures will have to be taken since the reform increases the deficit by one point in the year 2050.”
