Spain | Fiscal Watch. March 2023

The latest budget execution data confirm that during the latter part of 2022 the path of adjustment slowed down and the estimate of 3.9% of GDP for the public deficit in 2022 and 2023 is maintained. In a no-policy-change scenario, the cycle will reduce the deficit to 3.3% of GDP in 2024.

Key points

• Key points:
• Tax revenue will remain buoyant, supported by strong employment and rising wages and pensions, but the economic slowdown could dampen its recovery.
• Inflationary pressures on public wages, pension and interest expenditure will absorb part of the margin granted by automatic stabilisers, and public expenditure will remain at levels similar to those reached after the previous financial crisis.
• In 2022, public debt rose to 113.1% of GDP. The persistence of the fiscal imbalance, together with the expected economic slowdown and rising financing costs, means that the ratio is projected to fall only slightly to 107% by the end of the 2023-2024 biennium.
• The Recovery Plan would have reached a good pace of implementation during 2022, and around EUR 13 billion could have already reached the economy. The start of 2023 suggests that delivery could be regaining traction, and if this continues, between EUR 15 and 20 billion could be delivered this year.

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