Published on Friday, January 28, 2022

Spain | Fiscal Watch 1Q22

The latest budget execution data lead to a revision of the deficit to 6.8% in 2021 and 4.8% in 2022. In 2023, the cyclical recovery of activity will favour the correction of the public deficit to 3.0%. Implementation of the Recovery Plan remains sluggish, and support will take time to reach households and firms.

Key points

  • Key points:
  • The public deficit, excluding local corporations, accumulated up to October 2021 stood at 3.9% of GDP, compared with 7.2% in the same period last year.
  • The latest data confirm the strength of tax revenues in 2021, which already exceed pre-pandemic levels. Meanwhile, the recovery in employment and the lower cost associated with the COVID-19 pandemic would have favoured a rapid adjustment in public expenditure.
  • 2021 would have closed with a correction of the deficit in all sectors. The central government would have once again absorbed part of the deficit of the autonomous communities and the Social Security.
  • Government revenue and expenditure will remain high over the biennium 2022-2023, largely due to the acceleration in the implementation of the Recovery Plan. However, implementation is slow, and the aid will still take time to reach households and companies.
  • Given that public debt will remain at high levels, the main risks to the fiscal scenario will continue to be pandemic uncertainty, inflation expectations and the impact of the withdrawal of monetary stimulus.

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