Fiscal Balance in Spain
Spain - Fiscal Balance
President Rajoy announces new fiscal reform
On 20 June, the administration of President Mariano Rajoy unveiled a fiscal reform in a bid to prop up economic growth. The measures include cutting the corporate tax from the current 30.0% to 28.0% in 2015 and to 25.0% in 2016; a cut to the income tax and a reduction in the number of income tax brackets, among others. The government also approved new measures to broaden the tax base, such as reducing tax breaks. That said, the government dismissed the possibility of increasing the value-added tax (VAT) rate. Finance Minister Cristobal Montoro stated that the recovery is strong enough that lower taxes will not dampen tax revenue.
While the government claimed that these measures will provide additional support to the country’s incipient recovery, some analysts pointed out that the government’s true aim is to strengthen its position ahead of the general and local elections that are scheduled for 2015.
The European Commission was surprised by the government’s announcement. On 20 June, Commissioner for Economic and Monetary Affairs Olli Rehn said that, although the European Commission (EC) was “generally” aware of the Spanish government’s plan, “I cannot say that we have been consulted to detail.” In addition, senior officials from the European Commission noted that the Spanish government has ignored some of the EC’s recommendations, such as increasing the VAT tax. The same source also expressed that these measures could pose additional risks to Spain’s fiscal consolidation.
The government set a deficit target of 5.5% of GDP for this year and of 4.2% of GDP for 2015, before returning to below the 3.0% threshold set by the European Commission in 2013.
FocusEconomics panelists expect that the government will reach the new target this year, with a projected 5.3% of GDP shortfall. In 2015, panelists see the fiscal deficit narrowing to 4.3% of GDP.
Spain - Fiscal Balance Data
|Fiscal Balance (% of GDP)||-6.0||-5.2||-4.3||-3.0||-2.5|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||0.46||5.62 %||Dec 31|
|Exchange Rate||1.12||0.65 %||Dec 31|
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February 7, 2020
Industrial production rose 0.8% year-on-year in seasonally- and calendar-adjusted terms in December, down from November’s revised 1.6% expansion (previously reported: +2.1% year-on-year).
February 5, 2020
Largely reflecting softer growth of the services sector, the IHS Markit composite Purchasing Managers’ Index (PMI) dropped from 52.7 in December to 51.5 at the start of the year.
January 31, 2020
The economy gained some traction in the final quarter of 2019, according to an advance GDP estimate released by the National Statistics Institute (INE) on 31 January.
January 31, 2020
Spain’s current account balance recorded a surplus of EUR 3.4 billion in November 2019, above both the EUR 2.1 billion surplus recorded in November 2018 and EUR 2.8 billion surplus logged in October.
January 30, 2020
The Spanish Board of Architects approved 6,896 new construction permits in November 2019, according to data published by the Ministry of Public Works.