Spain | Public expenditure during the crisis

Summary

Public expenditure in Spain could grow between 10 and 11 percentage points (pp) of GDP in 2020, surpassing 52% of GDP, according to BBVA Research forecasts. This increase is justified by the atypical situation that the Spanish economy is experiencing due to COVID-19.

Key points

• Key points:
• Firstly, while it is true that expenditure will increase this year, its importance relative to activity will rise due to the sharp drop in GDP that will be seen in 2020.
• Secondly, consumption and investment by public administrations has a stabilizing effect.
• Thirdly, automatic stabilizers also help sustain household consumption.
• Fourthly, a discretionary effort has been made to increase expenditure. In particular, resources have been introduced to help tackle the health crisis.
• Although expenditure should fall next year, it seems that the crisis has pushed us toward levels of expenditure that will remain structurally high. It will therefore be necessary to demonstrate that best use is being made of public resources.

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