Spain | Fiscal Watch. October 2022

Summary

Sound budget execution data lead to an improvement in the public deficit forecast to 4.2% of GDP in 2022 and 4.4% in 2023. The reduction of the imbalance will be limited by announced or prolonged measures, by the impact of inflation on spending and by the effect that the slowdown may have

Key points

• Key points:
• Government revenue growth is expected to moderate in line with the slowdown in activity expected for the 2022-2023 biennium.
• Expenditure will remain elevated as measures to alleviate the energy crisis and inflation pressure will absorb the space freed up by lower COVID spending.
• Uncertainty about the timing and impact of the PRTR leads to a downward revision of its execution expected.
• Public debt will remain elevated at around 116% of GDP during 2022 and 2023. The tightening of monetary policy and ECB rate hikes will increase the financial burden, although it will still remain at historically low levels.
• BBVA Research forecasts differ from those presented by the Government in the Budget Plan for 2023, which points to a further reduction in the deficit, which will be exclusively cyclical.

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