Spain | Lack of agreement on fiscal framework moderates consolidation process

Budget execution data up to July 2019 slightly worsens the dynamics of 2018. For the 2019-2020 period, an exclusively cyclical adjustment is expected, which will determine a slightly expansive tone of fiscal policy

Key points

• Key points:
• The State deficit up to July 2019, excluding local corporations, stands at 2.0% of GDP, worsening by a tenth of that observed in the same period last year
• Public revenues continue to grow up to July, while public spending continues to expand slightly, in line with expectations
• These figures anticipate a further breach of the stability objective (-1.3% of GDP) and of the government's forecast, as in the 12-month cumulative period and without local finances, this deficit is equivalent to 3.2% of GDP
• In this context, the deficit would be reduced to 2.3% of GDP in 2019, which would mean that during the second half of the year part of the expansionary path observed in the first half of the year would be reversed
• In a scenario that contemplates a new budgetary extension and no fiscal policy change, 2020 is expected to end with a deficit of 1.9%. This scenario, which differs from the Government's forecasts (-1.7% of GDP in 2020), implies, in any case, a non-compliance with the European Commission fiscal commitments

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