Spain | Ensuring budgetary stability in light of the COVID-19 crisis

Summary

The COVID-19 crisis will cause an unprecedented deterioration in public finances, which will dwarf even the deficit and debt levels seen during the Great Recession. It is essential that Spain emerges from the crisis in a position to resume the path of convergence with the most advanced European countries.

Key points

• Key points:
• BBVA Research forecasts that the primary public deficit could exceed 12% of GDP in 2020, with a public debt level above 120% of GDP.
• Without a clear strategy for budgetary stabilization, designed as soon as possible and implemented when the economic recovery allows it, the risk of sliding into a situation of unsustainable debt cannot be ruled out.
• Given the magnitude of the public accounts sustainability challenge with which we are confronted, small adjustments to public revenues and expenditures are not enough.
• The most urgent and effective consolidation strategy in the medium and long term is to increase potential growth and reduce structural unemployment.

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