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)||-7.0||-6.0||-5.3||-4.5||-3.1|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||1.38||5.62 %||Jan 15|
|Exchange Rate||1.14||0.65 %||Jan 16|
|Stock Market||8,913||-0.74 %||Jan 16|
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January 11, 2019
Industrial production declined 2.6% year-on-year in seasonally- and calendar-adjusted terms in November, contrasting October’s revised 0.7% increase (previously reported: +0.8% year-on-year) and marking the sharpest contraction since May 2013.
January 4, 2019
Reflecting weaker activity growth in the manufacturing sector, the IHS Markit composite Purchasing Managers’ Index (PMI) edged down from 53.9 in November to 53.4 in December.
January 3, 2019
Robust momentum was maintained in the third quarter of the year, according to a second GDP estimate released by the National Statistical Institute (INE) on 28 December.
December 28, 2018
Spain’s current account balance recorded a surplus of EUR 294 million in October, a marked decline from the EUR 1.9 billion surplus recorded in October 2017 and well below the EUR 696 million surplus logged in September.
December 28, 2018
According to data published by the Ministry of Public Works (Ministerio de Fomento), the Spanish Board of Architects (Colegio de Arquitectos Técnicos) granted 8,583 new construction permits in October.