Spain | Deficit and an Exit Strategy

Summary

Spanish public finances are not in the best position to face this crisis. Since 2015, policies to reduce taxes and increase expenditure have impaired the fiscal structural balance.

Key points

• Key points:
• As a result, despite years of high growth and declining unemployment rates, the deficit stood at 2.8% of GDP toward the end of last year.
• This year, in light of the sharp fall in activity, the automatic stabilizers and the discretionary measures put in place could see the deficit exceed 10% of GDP.
• The risks on the horizon suggest that the deficit could deteriorate even further in the future.
• It is necessary to design a credible multi-year fiscal consolidation plan that minimizes the impact on activity.

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