- The macroeconomic picture foresees a GDP growth in smooth acceleration, reaching 3% in 2017
- At the end of 2015, unemployment will be lower than at the end of 2011 both in number of unemployed and in rate
- For the first time since the beginning of the crisis, in 2014 there will be net job creation
- Domestic demand will contribute positively to growth in 2014, after six years of negative contribution
- The Government improves the target of deficit reduction for 2014 from 5.8% to 5.5% of GDP
- The new Stability Program includes a wide-ranging fiscal reform with an approximate impact of the IRPF reform that will reach 5,000 million euros net in two years
- The tax reduction will focus on taxpayers with low and medium incomes
- The scenario of the reforms fits perfectly into the process of recovery and fiscal consolidation
The Council of Ministers approved today the Stability Program and the National Reform Program, which will be sent this afternoon to the European Commission within the obligations of the Member States within the framework of the European Semester.
It is the third time in this legislature that the Government prepares and presents these two Programs, but it is the first one carried out in a context of economic recovery.
MACROECONOMIC TABLE
The macroeconomic picture 2014-2017 notes the recovery of the economy but it maintains the conservative nature of the previous Stability Program. The hypotheses used are prudent and realistic and their objective is to give credibility to the public deficit objectives. Economic growth is expected in gentle acceleration, reaching 3% at the end of the period. Already during the current year There will be significant positive growth, for the first time since the crisis began, net job creation and reduction of the unemployment rate. These are projections that certify the exit of the crisis and that configure a new less vulnerable economic model.
For the current year and the next three it is estimated that a balanced economic growth will be achieved, sustained over time and generating employment. The sustainability of growth is achieved by the important advances achieved in correcting the main imbalances in the Spanish economy. Competitiveness lost since the entry into the euro has recovered, prices have moderated significantly, private indebtedness has decreased significantly, the public deficit has been reduced despite the recession experienced and a current account surplus has been reached and a external financing capacity, which allow the process of reducing external indebtedness to begin.
A notable aspect of the macroeconomic picture is that During the entire forecast period, both internal and external demand will contribute positively to growth. Domestic demand will do so for the first time in 2014, after six years of negative contribution to growth. The greater the consumer confidence, the better employment prospects and the moderation of prices, They will favor private consumption, which will gain momentum throughout the entire period. In parallel, also in 2014 gross capital formation will grow for the first time in seven years, due to the dynamism of investment in capital goods. The growth of investment in construction is estimated from 2015. External demand will continue to contribute positively to the variation in GDP, in a framework of import growth. This is explained by the maintenance of the dynamism of exports, associated with the continuity of competitiveness gains, and the better growth prospects of the main export destination markets.
Equally, The financing capacity of the Spanish economy will continue to increase, to be at levels around 2.5% of GDP, which will reduce external indebtedness. This reduction could be close to 47,000 million euros in the 2014/2015 biennium, thanks to the foreign financing capacity expected during those years.
In addition to a sustained recovery over time, it is a dynamic generating employment. The structural improvements achieved with the 2012 Labor Reform will enable job creation with growth rates lower than those of the past. Already In 2014, net employment will be created for the first time since the beginning of the crisis. For the 2014/2015 biennium, a significant reduction in the activity growth threshold is estimated to lead to job creation. Similarly, significant progress will be made in reducing unemployment. For the first time since the beginning of the crisis, in 2014 EPA unemployment will be reduced in annual average terms. At the end of 2015, unemployment will be lower than at the end of 2011, both in number of unemployed and in rate.
STABILITY PROGRAM
The update of the Stability Program of the Kingdom of Spain (2014-2017) states that The new deficit target for all Public Administrations for 2014 will be 5.5% of GDP. This forecast represents a reduction of three tenths compared to the previous objective (5.8%), which had been validated by Brussels.
The main reasons for this downward revision are two: on the one hand, the finding that the return to economic growth will be faster and stronger than expected when the objective was set at 5.8% . On the other hand, the success in the fight against the deficit reached by the Public Administrations in 2013, which is allowing the Treasury to finance itself in better conditions, with the consequent reduction in the debt interest bill.
The reforms undertaken by the Government and the fulfillment of the 2013 deficit target by all Public Administrations have resulted in a recovery of market confidence with the corresponding fall in the risk premium. Since the maximum reached in July 2012 (636 basis points), the risk premium has fallen by almost 500 basis points. This commitment to fiscal consolidation, which is maintained in the 2014 General State Budgets, is allowing the Treasury to finance at much lower rates, so that the debt interest bill will decrease considerably.
On the other hand, the forecast of improvement in GDP growth due to the momentum of the activity is already being noticed in the tax collection of the first months of the year. In the previous Stability Program it was affirmed that, in case of improvement of the economic cycle, its results would be translated to reduce the deficit, maintaining the structural effort and this has been done.
In this way, the new fiscal consolidation path will reduce the public deficit from 6.6% of GDP reached in 2013 (without financial assistance) to 5.5% of GDP in 2014. The reduction of the deficit will continue in the next years of This is expected to be reduced to 4.2% in 2015, and 2.8%, in 2016, already below 3% of the Excessive Deficit Procedure. In 2017, the deficit will barely stand at 1.1% of GDP.
Of the 5.5% GDP deficit target for 2014, 3.5% will correspond to the Central Administration, which closed the year 2013 with a deficit of 4.3% (without financial aid). This means a reduction of eight tenths in a year, which shows that Government commitment to fiscal consolidation is maintained. The forecast also indicates that Social Security will have a deficit of 1% of GDP, the same percentage that will correspond to the autonomous communities, while local entities must close the year in budget balance.
NATIONAL REFORM PROGRAM
The National Reform Program 2014, which continues the reformist agenda initiated by the previous two, has as its main objective to consolidate the economic recovery so that growth is sustainable and employment creation is favored.
Like its predecessors, the PNR 2014 is structured in five main areas:
- Differentiated fiscal consolidation and growth favoring
- restore normal loan conditions to the economy
- promote current and future growth and competitiveness
- fight unemployment and the social consequences of the crisis
- modernize the Public Administration
1. Differentiated fiscal consolidation and growth favoring
The Government will continue to fulfill its commitments in 2014. The consolidation of public accounts and the achievement of budgetary stability have been central elements of the Government's economic policy to grow and create employment.
In this area, the main novelty will be the tax reform which will be presented with the following objectives:
- improve the collection capacity of our tax system
- encourage growth and employment
- contribute to improve the competitiveness of the Spanish economy
- reduce fraud
- contribute to fiscal consolidation
It will be a comprehensive tax reform, of wide draft, and designed in several stages. The approximate total impact of the IRPF reform will reach 5,000 million euros net in two years.
The objective is to simplify taxes and improve efficiency in a coordinated manner in all of them so as to stimulate economic growth and job creation. The reform will include, among others, personal income tax and Corporate Income Tax. In addition, indirect and environmental tax reforms are included, always linked to community regulations. The tax reduction will begin in January 2015, focusing on low and middle income taxpayers.
The process designed in stages will allow a temporary adaptation to the new tax conditions. In this way, the tax reduction to taxpayers will be made compatible with revenues in the area of 38% – 39% of GDP.
The tax reform will therefore serve to consolidate the growth of tax collection, fruit of the reforms undertaken by the Government and that have allowed the improvement of the economic situation. The latest available data, referring to the first quarter of 2014, consolidate the trend change initiated at the end of 2013 and already place the tax collection growth at 4.7% in homogeneous terms, and above 5.1% in gross rate. Especially noteworthy is the growth in income of SMEs and freelancers (for fractional payments, it reaches 6.3%), which is the highest rate since 2007.
2. Restore normal loan conditions to the economy
To consolidate the economic recovery it is necessary to reactivate the credit. After the reforms of the last two years, the Government considers that the financial sector is in a position to exercise its essential function and wants to contribute to promoting this process. For it:
- The ICO will have up to 24,000 million euros of loanable funds in 2014.
- The Law on the Promotion of Business Financing.
- The regulation of Venture Capital Entities will be improved; the regulatory framework for transferable guarantees will be reformed, and Spanish law will be adapted to the new Basel III framework.
In addition, to ensure the survival of companies with an excessive accumulated financial burden but viable from an operational point of view, the legal regime of bankruptcy agreements will be made more flexible, especially as regards majorities and their effects. The legal regime of the bankruptcy administration will also be reviewed.
3. Promote current and future growth and competitiveness
Growing up in a sustained way requires guaranteeing continued competitive functioning of the Spanish economy. To this end, in 2014, the Government will continue to adopt measures that guarantee a flexible functioning of the markets and allow a moderate price adjustment. In addition, it will implement measures that encourage growth in the medium term, by improving training and research.
- The process of regulatory adaptation to the Market Unit Guarantee Law (LGUM). Important steps have already been taken in this process, which will be carried out throughout 2014 and 2015. So far, the need to adapt more than 2,700 standards has been detected.
- The Disindexation Law of the Spanish Economy.
- Measures of entrepreneurship support and in 2014 a Plan to fight against non-compliance with administrative deadlines that affect businesses and citizens.
- It will launch anew training model for employment and measures will be promoted in the field of innovation and new technologies. The objective is to continue improving the education and training systems of the human capital.
- CNMV Reform. The objective is to provide this body with greater autonomy for the fulfillment of its functions and more capacities in its regulatory, inspection and sanctioning actions, in line with international trends.
4. Fight against unemployment and the social consequences of the crisis
In 2014, the Spanish economy has begun to create net employment and to boost it, the Government is adopting measures to promote labor hiring and the activation of the unemployed:
- It will be adopted the Spanish Employment Activation Strategy 2014-2016 which culminates the transition to a system of evaluation and orientation to results of active employment policies.
- The National Youth Guarantee Implementation Plan, which has funding from community funds amounting to 1,887 million euros in 2014 and 2015.
- Measures will be promoted to combat the worsening of poverty and social exclusion profiles. More specific actions will be developed aimed at groups with special difficulties in accessing the labor market because the most effective way to fight against poverty and social exclusion is the job creation and job placement.
- Along with the reinforcement of labor insertion, other actions included in the National Plan of Action for Social Inclusion 2013-2016, the National Integral Strategy for the Homeless to be adopted in 2014 or the reform of the legislation on protection of labor protection childhood. Likewise, in 2014 the Law of the Third Sector of Social Action and the reform of the Law of Volunteering will be presented.
5. Modernize Public Administration
A competitive economy demands modern, transparent and agile Public Administrations. On this premise the Commission for the Reform of the Administration was created (CORA) in 2012, which has carried out the most important review exercise that has been done in the Spanish public sector in recent decades, as recently recognized by the OECD.
In 2013, significant progress has been made in this process and this year the regulatory effort will continue and savings will begin to be computed as its execution progresses. It is estimated that in 2014 the completed measures will amount to approximately 50% of the total.
- A new Law on the Legal Regime of Public Administrations and the Common Administrative Procedure.
- Measures to improve the efficiency of the State Treasury, rationalization and elimination of duplicities, increase efficiency in the configuration and management of public employment and boost electronic administration and reduce charges.
On the other hand, it is moving forward in measures of democratic regeneration, strengthening of institutions and fighting corruption. This constitutes an essential element to recover the confidence of the citizens in the institutions through preventive measures and initiatives that close spaces to impunity, detect crimes better and punish more harshly.
The actions already carried out in 2012 and 2013 are completed with two bills that will be approved in 2014:
- The draft Law on the control of the economic – financial activity of the Political Parties.
- The draft Law regulating the exercise of senior office of the General State Administration.
Structural funds
Among the novel elements of the PNR 2014, it is that it relates the reformist priorities of the Government and its objectives of economic policy and job creation with the programming of the Structural Funds assigned to Spain in the new period 2014-2020. Thus, in the programming of the Funds, measures that increase productivity and employment, boost private investment and develop sectors with high growth potential will be enhanced.
