Spain | Fiscal Watch 2Q22

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.

Key points

• Key points:
• In 2021, tax revenues confirmed their strength, while a declining impact of the waves and pandemic-related constraints would have supported a reduction in expenditures.
• 2021 closed with a correction of the fiscal imbalance in all sub-sectors, with the Central Government again offsetting much of the COVID-related cost of other governments.
• The invasion of Ukraine and the measures adopted to mitigate the rise in energy prices would be slowing down the recovery of revenues in 2022.
• Expenditure growth will remain contained, as the effects of COVID-19 diminish and offset some of the effort to mitigate the effects of the war.
• The high level of public debt is a vulnerability factor as the new crisis scenario may change the normalisation process of monetary policy, accelerating the withdrawal of stimulus and deteriorating financing conditions.

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