Sound budget execution data introduce positive biases on the deficit forecast in 2022, while the slowdown in activity in 2023 will dampen the cyclical recovery of the government balance. Deficit projections are revised to 5.5% of GDP in 2022 and 5.4% in 2023.
Spain | Recovery without a structural reduction of the public deficit
The forecasts of the Stability Program point to a fairly strong recovery, with GDP growth above potential, but the public accounts suggest a cyclical improvement of the deficit rather than its structural component.
2021 closed with a deficit of 6.8% of GDP, the same as estimated three months ago. The invasion of Ukraine and measures to mitigate the rise in energy prices slow down the adjustment, and the deficit is expected to fall to 6.0% in 2022. In 2023, the deficit would fall to 4.6% of GDP.
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.
Spain | Assuring the sustainability of Social Security
One of the roles of Social Security is to provide insurance in the form of retirement pensions. Society is faced with the challenge of ensuring that Social Security provides this social policy through a sustainable and adequate pension system.
Good budgetary implementation data introduce positive biases on the deficit scenario, and the forecast is revised to 7.0% of GDP in 2021 and 5.0% in 2022. The expected impact of the Recovery Plan in 2021 is downgraded and carried forward to the following years.
Positive development on tax collection and a lower impact of the pandemic introduce biases in the deficit forecasts, which are revised to 7.7% of GDP in 2021 and 5.5% in 2022. The approval of the Recovery Plan and the suspension of fiscal rules anticipate that fiscal policy will remain expansionary.
The 2020 health crisis resulted in a large deficit of 10.1% of GDP and pushed public debt up to 120%. Going forward, fiscal policy will be conditioned by the suspension of fiscal rules and the arrival of Recovery funds, which suggests that it will remain expansionary.