• The Council of Ministers today adapted the objectives of budgetary stability and public debt of 2020 to the economic reality of Spain
  • It has also approved the path of fiscal consolidation and public debt for the period 2021-2023 that advances in the reduction of the deficit without jeopardizing growth and job creation
  • The new planned path involves the fulfillment of deficit targets of 1.8% of GDP in 2020; 1.5% of GDP by 2021; 1.2% by 2022 and 0.9 of GDP by 2023
  • The state spending ceiling for 2020 will be 127,609 million euros, 3.8% more than in 2019
  • In line with international organizations, 1.6% growth is expected in 2020 and its stabilization over the next few years

The Council of Ministers has adapted the objectives of budgetary stability and public debt of 2020 to the economic reality of Spain and to the situation of budgetary extension in which the country has been located since January 2019. It has also reported the limit of non-financial expenditure of the State for 2020, which amounts to 127,609 million euros.

In this way, the foundations are laid for the preparation of the General State Budgets of 2020, which will incorporate the Government's priorities in the matter of strengthening public services, recovery of social rights and sanitation of public accounts.

The Government has also approved today the new objectives of budgetary stability and public debt of the period 2021-2023 that grant a greater margin to the Autonomous Communities and Social Security. The third vice president and minister of Economic Affairs and Digital Transformation, Nadia Calviño, and the Minister of Finance, María Jesús Montero, have stressed that it is a “realistic and credible path that allows progress in reducing the deficit and public debt without put economic growth and job creation at risk ”.

With these measures, the Government advances in the elaboration of the 2020 Budgets that, as Montero pointed out, “will pivot on the strengthening of the welfare state, the commitment to a fair ecological transition, the reduction of inequalities and the defense of interests of the middle class and working class ”. Likewise, the Budgets will contemplate future investments in professional training and digitalization.

Deficit targets

For the Public Administration as a whole, a deficit of 1.8% of GDP is contemplated in 2020. For the Central Administration, the limit is 0.5%; for the autonomous communities, 0.2%; for Social Security, -1.1% and budget balance for municipalities. If the last budget closure data corresponding to 2018 is taken as a reference, the greatest fiscal effort falls on the Central Administration, which should reduce its deficit from 1.32% recorded in 2018 to 0.5%. An effort of eight tenths. Social Security, on the other hand, has the obligation to reduce its deficit by three tenths (from 1.44% to 1.1%). The effort required of the Autonomous Communities is less and between 2018 and 2020 it is sufficient that they reduce their deficit by one tenth to meet the stability objectives.

With respect to the period 2021-2023, the stability objective is 1.5% by 2021; 1.2% by 2022; and 0.9% by 2023. This path makes the reduction of the public deficit more passable in the current economic context, while allowing the Government to adopt measures that improve the welfare state.

In the breakdown by subsectors, the Central Administration will progressively reduce its deficit to 0.1% in 2023. The deficit of the Autonomous Communities will be progressively reduced by one tenth until reaching equilibrium in 2022 and 2023.

For the Local Entities budget balance is contemplated in 2020 and in the period 2021-2023.

Finally, Social Security will decrease its deficit in a more moderate way to place it at 0.8% of GDP in 2023.

Capacity (+) Financing Need (-), SEC-2010 (as a percentage of GDP)
2020202120222023
Central administration-0.5-0.4-0.3-0.1
Autonomous communities-0.2-0.10.00.0
Local Entities0.00.00.00.0
Social Security-1.1-1.0-0.9-0.8
Total Public Administrations-1.8-1.5-1.2-0.9

Debt Objectives

Regarding the public debt targets for 2020 and for the period 2021-2023, the Government is committed to maintaining a downward path. The ratio will be below 90% of GDP at the end of the legislature. These are the objectives by subsectors:

Public debt objectives (% GDP)
2020202120222023
Central Administration and Social Security69.268.667.766.6
Autonomous communities23.422.822.121.4
Local Entities2.02.01.91.8
Total Public Administrations94.693.491.789.8

Spending rule

Likewise, for the purpose of complying with the spending rule, the medium-term Gross Domestic Product growth rate of the Spanish economy has been established in the status report that accompanies this Council of Ministers agreement.

The variation of the nominal computable expense of the Central Administration, of the Autonomous Communities and of the Local Corporations may not exceed said reference rate during this period, following the Organic Law on Budget Stability and the Stability and Growth Pact:

Nominal reference rate (% annual variation)
2020202120222023
2.93.03.23.3

State spending ceiling

On the other hand, in the Agreement that the Government sends to the General Courts with the objectives of budgetary stability and public debt, the limit of non-financial expenditure of the State, which is not put to the vote, which amounts to 2020 to 127,609 million euros. This is an increase of 3.8% compared to a 2019 base budget that, given the lack of Budgets last year, includes the budget extension plus the expenses assumed last year.

The Government considers that this increase in the limit of non-financial expenditure is consistent with compliance with the path of stability and EU fiscal rules, but also expansive enough to carry out the commitment to advance social policies and offer services higher quality audiences to citizens.

Macroeconomic picture update

The Government estimates that the Spanish economy will grow 1.6% in 2020 and "will continue to be higher than expected for the euro zone," said the Vice President and Minister of Economic Affairs and Digital Transformation that has also indicated that it is "a more balanced growth than that registered in previous stages ”.

The growth will remain at similar rates during the 2021-2023 period, with a slight increase at the end. The growth rate in Spain is influenced by a more uncertain external environment and the maturity of the economic cycle.

During 2020, the weight of domestic demand in economic growth will increase, with a contribution of 1.5 percentage points, due to the dynamism of the labor market and the progressive recovery of disposable income, mainly due to the improvement in wages. In line with these determining factors, private consumption will recover, reaching an estimated growth of 1.5%. Likewise, public consumption will be moderated up to 2%.

On the other hand, a positive contribution of the external demand of 0.1 percentage points is expected, due to the better export performance, which is estimated to grow 2.7%. On the other hand, imports will have an estimated growth of 2.6%.

The trend in the labor market remains positive, although job creation will be adjusted to the evolution of GDP. The unemployment rate will continue to decrease and, at the same time, the active population will increase. Thus, unemployment is expected to be 13.6% this year and reduced to 12.3% in 2023.

Finally, the current account balance is expected to remain a surplus for the entire period and the Spanish economy maintains financing capacity abroad.

This dynamic and sustained growth will be compatible with a contained price evolution

2020-2023 scenario
20192020202120222023
Real GDP2.01.61.51.61.7
Private consumption1.11.51.41.31.3
Public consumption2.22.01.81.61.6
Investment (FBCF)1.91.41.41.82.3
Exports2.32.73.13.43.4
Imports1.22.62.93.13.3
Nominal GDP3.53.53.43.53.6
Employment (EETC)2.31.41.41.41.5
Unemployment rate (%)14.113.613.012.612.3



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