Spain | Fiscal Watch. July 2024

Summary

The surprise at the end of 2023 introduced a positive bias in deficit forecasts for 2024. Improved activity and the withdrawal of measures to mitigate rising prices could bring the public deficit below 3% of GDP. Fiscal improvement in 2025 will depend on new fiscal rules.

Key points

• Key points:
• The public deficit, excluding local corporations, stood at 0.4% of GDP in April 2024, keeping the twelve-month accumulated balance around -3.5% of GDP. Tax revenues maintain a growth pattern similar to the end of 2023, while public spending growth moderates.
• With a forecasted public accounts imbalance of around 3% of GDP by the end of 2024, Spain has avoided the application of the excessive deficit protocol, but the high level of public debt will necessitate the development of a structural fiscal plan.
• With a 7-year adjustment plan, an average annual reduction of the cyclically adjusted primary balance of between 0.3 and 0.4 percentage points of GDP will be necessary. In this scenario, debt would fall below 90% by the end of the plan period.
• Ensuring a downward path of public debt will require considerable fiscal effort, with average annual net spending growth of 3% during the adjustment period, and achieving primary surpluses of 1.7% of GDP.

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