Spain Fiscal


Spain revises fiscal deficit figures up

On 27 March, Deputy Budget Minister Marta Fernandez Curras announced that the fiscal deficit - excluding aid to the banking sector - reached 6.98% of GDP in 2012, above both the 6.74% of GDP shortfall reported on 28 February and the 6.3% target set by European authorities. The higher-than-estimated figure arises from Eurostat's (the statistics office of the European Union) request to account for tax refunds for the period in which they were claimed, instead of when they are approved. The government must now revise its budget numbers reaching back to 1995.

According to current EU targets, the government must cut its fiscal deficit to 4.5% of GDP this year and further narrow it to 2.8% of GDP in 2014. However, the prolonged recession is prompting Spain to seek yet another extension of its deficit goals, and the government is hoping to gain an additional year in which to bring the deficit down to the levels demanded by European authorities. This month, Spain is expected to present its budget plans for the next two years, alongside an updated macroeconomic scenario which seems likely to reflect a gloomier economic picture than previously expected. Against this backdrop, FocusEconomics Consensus Forecast panellists expect that the government will miss its current target again this year with a projected fiscal deficit of 5.9% of GDP, which is unchanged from last month's forecast. For 2014, panellists see the fiscal deficit narrowing only to 4.8% of GDP.

Moreover, amid the sharp deterioration in public finances seen since the onset of the crisis, public debt has mushroomed from 36.3% of GDP in 2007 to 84.1% of GDP in 2012. Many economists consider the 90% of debt-to-GDP ratio as a critical threshold beyond which debt levels become unsustainable. According to this month's Consensus, Spain is set to cross this threshold in 2013, with debt reaching 92.2% of GDP.


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Spain Fiscal Chart

Spain GDP Annual April 2013

Note: Annual public debt and fiscal balance as percentage of GDP.
Source: National Statistical Institute (INE) and FocusEconomics Consensus Forecast.

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