- The Budget Plan allows us to undertake a triple objective: to comply with fiscal discipline, comply with citizens by recovering the redistributive function of fiscal policy and maintain the long-term sustainability of the economy
- The Government expects a reduction of the public deficit by nine tenths to 1.8% of GDP in 2019, which means a structural effort of 0.4 pp of GDP
- With this reduction, Spain will achieve a primary surplus next year for the first time since 2007 and the public debt will fall in 2018 and 2019 twice as much as in the previous three years
- The new macroeconomic chart presents a downward revision of one tenth of the GDP growth forecast for 2018 and 2019
The Council of Ministers has approved the Budget Plan and the new macroeconomic scenario that the Government will send to the European Union today.
The Minister of Economy and Business, Nadia Calviño, and the Treasury, Mª Jesús Montero, presented both documents at a press conference. Nadia Calviño has pointed out that the draft Budget Plan allows us to undertake three objectives: to comply with fiscal discipline, for the first time the deficit is going to be reduced not only by the economic situation but also by the Government's action; meet citizens by recovering the redistributive function of fiscal policy and maintain the long-term sustainability of the economy, which will result in the next year for the first time since 2007 Spain will register a primary fiscal surplus and public debt will begin to be reduced at a significant rate.
Nadia Calviño has highlighted the importance of this triple objective by pointing out that “the measures included in the draft Budget Plan agreed today by the Government represent a turning point in the message that we want to move from economic policy. In our opinion, government action can and should contribute to the well-being of citizens and to build a more just society. ” Likewise, the Minister of Economy and Business has insisted that “a responsible economic policy can be made that combines fiscal discipline with the fight against inequality”.
New macroeconomic chart
The new macroeconomic chart presented today includes a review of economic growth forecasts compared to last July. Specifically, the tenth of the GDP growth forecast for 2018 and 2019 is reduced by one tenth, standing at 2.6% and 2.3%, respectively. These forecasts are in the most prudent range of those handled by the main national and international organizations.
In this regard, Minister Nadia Calviño has highlighted the exercise of prudence in the preparation of macroeconomic forecasts: “Our macro chart is governed by the principle of prudence of forecasts. For both 2018 and 2019, our forecasts are in the lower limits of the forecast ranges managed by the main national and international organizations ”.
Likewise, the Minister of Economy and Business has indicated that Spain continues to maintain robust growth rates, above the countries around us, which have been progressively moderating since 2015.
The downward revision in one tenth of the growth of 2018 is associated with a less favorable behavior of external demand, as well as changes in the quarterly national accounting figures published by the INE, which reduces the first quarter growth by one tenth of 2018.
Taking into account inflation, the nominal GDP expansion rate is expected to be 3.9% this year and 4.1% next year.
In sum, the Budget Plan sent today is, in the words of Minister Nadia Calviño, "responsible, realistic, is aligned with the commitments made with our European partners and frames an economic policy aimed at improving the lives of citizens."
The public deficit will be reduced nine tenths to 1.8% of GDP in 2019
The new macroeconomic chart that the Government will send to Brussels foresees a reduction of the public deficit by nine tenths, up to 1.8% of GDP in 2019. This reduction will allow Spain to achieve a primary surplus next year around 0.5 pp of GDP, for the first time since 2007. This means that the pace of public debt reduction will accelerate.
As a consequence, public debt will fall almost twice as much in 2018 and 2019 as in the previous three years from 98.1% at the end of 2017 to 95.5% next year.
A deficit of 1.8% in 2019 represents a structural effort in the environment of 0.4 pp of GDP, in line with the Government's commitment to take the necessary measures to increase the sustainability and soundness of public finances.
With this adjustment, the Government complies with the Stability and Growth Pact commitments. The Government expects that the public deficit will close in 2018 at 2.7% of GDP below the 3% reference of the corrective arm of the Covenant, which will imply that from 2019 Spain will be subject to the preventive arm, whose requirements are of structural adjustment.
This has been shown by Minister Nadia Calviño who stressed that “this deficit objective does not jeopardize either economic growth or job creation, in fact, the impact is neutral on our forecasts of real GDP growth in fiscal year 2019. It is a very important message since this is the fundamental priority of this government: to maintain the path of job creation. In addition, this deficit objective allows to accelerate the rate of reduction of the public debt ”. Likewise, it has affected that the composition of the adjustment that has been designed assumes that the ratio of public expenditure to GDP falls slightly, from 41.2% in 2018 to 40.9% in 2019 and increases the income ratio, from 38.5 % to 39.1% in 2019.
