Spain | Fiscal Watch. January 2024

Summary

2023 deficit estimate remains at around 4,1% of GDP. In 2024 with the prolongation of the Central Government Budget and part of the anti-crisis measures, the deficit would be reduced to 3.7% of GDP. This scenario points to a smooth downward path in public debt ratio to 105% of GDP.

Key points

• Key points:
• Public revenues gained traction during the third quarter of 2023, thanks to taxes. For its part, expenditure growth accelerated at the end of 3Q23, driven by the increase in costs, pensions and public salaries.
• The contribution of the cyclical recovery of activity to the improvement of the deficit will be marginal and only the progressive withdrawal of anti-crisis measures will have an impact on reducing the imbalance in public accounts.
• The known data on the execution of the Recovery Plan suggest that during 2023 around 15,000 million euros would have reached the economy, with a driving impact on GDP growth of 1 pp.
• The fiscal rules will return in 2024, so Spain will foreseeably enter the Excessive Deficit Protocol, and an adjustment plan will be required to ensure an expenditure trajectory that guarantees the progressive reduction of the deficit and debt.

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