Spain | Uncertainty around fiscal policy in the 2019-20 period

The first budget execution data for 2019 slightly worsens last year's dynamics. In an environment of extended budget and policy uncertainty, the economic cycle will reduce the deficit, although the current fiscal targets will be missed.

Key points

• Key points:
• 2018: despite the strong fiscal impulse and thanks to the surprise increase in public revenues, the deficit was better than estimated
• The deficit deteriorates in the first two months of the year, due to the moderation in the dynamism of public revenues. Meanwhile, public spending maintained the dynamics of the end of last year
• In a no policy change scenario, the deficit would be reduced to 2.2% of GDP in 2019 and to 1.9% in 2020, supported by cyclical recovery
• The update of the SGP 2019-2022 indicates that the expansionary fiscal policy of the previous year will continue. Although it is committed to making the deficit reduction path more flexible, the adjustment is still very challenging

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