Spain | Fiscal Watch 4T20

Summary

The 2020 deficit is revised to 13% due to the strength of tax collection. The fiscal policy of the coming years will be conditioned by the implementation of the Recovery Plan

Key points

• Key points:
• Budget execution data up to August 2020 suggest a stabilization of the strong impact of the pandemic on the public deficit
• The 2020 deficit forecast is revised to 13% of GDP (from 14.4% in the previous forecast) because of the strength shown by taxes and the stabilization of expenditure growth
• In 2021, the cyclical recovery in activity and the temporary nature of many of the measures approved will lead to a rapid reduction in the deficit to 8.8% of GDP
• Draft National Budget 2021: very expansive budget, with the highest growth in spending observed in years, supported by Next Generation EU (NGEU) resources
• The management of the NGEU funds will be the great challenge of the coming years. The amount of resources promised will be an opportunity and a challenge to address the necessary structural reforms

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