- The macroeconomic table forecasts GDP growth of 2.1% in 2019 and 1.8% in 2020, a rate higher than the EU average
- The Independent Authority for Fiscal Responsibility (AIReF) has endorsed the forecasts of the macroeconomic scenario
- Employment growth is forecast at 2.3% in 2019 and 2% in 2020
- The document reflects the progress in fiscal consolidation with a reduction of the public deficit to stand at 2% in 2019
- The Plan contemplates an inertial scenario, which does not include additional income measures. The Government will update the plan with the same fiscal orientation already communicated to the European Commission in previous documents
- The Budget Plan includes the revaluation of pensions in 2020 of 0.9% with the aim of maintaining the purchasing power of pensioners and the agreed increase in the salary of officials of 2%
The Government will send the 2020 Budget Plan to the European Commission today, including a new updated macroeconomic scenario, in compliance with community regulations. The preparation of this document is marked by the situation of a functioning Government, which has prevented the approval of a Draft Budget for next year or the updating of the stability objectives. For this reason, the Government undertakes before Brussels to send an update to the document whenever possible.
The Budget Plan, which will be published today on the website of the Ministry of Finance, includes a review of the macroeconomic picture that reflects the strength of the Spanish economy. In fact, despite the slowdown caused by external factors and international uncertainty, Spain continues to grow above the average for the euro area and also does so in a more healthy way by continuing to reduce the public deficit and the public debt.
The fiscal consolidation data is based on an inertial fiscal scenario that does not include taking any additional measures on revenue.
On the expenditure side, measures already announced to the European Commission in the Stability Program are included, such as the revaluation of pensions or the salaries of officials.
Macroeconomic picture
The Government forecasts a growth in Gross Domestic Product (GDP) of 2.1% in 2019 and 1.8% in 2020. These figures lower the growth forecast for each year by one tenth with respect to those included in the Stability Program, submitted on April 30. This modification is almost entirely due to the statistical review of the Annual National Accounts carried out by the National Statistics Institute (INE) for the period 1995-2018, which has meant a downward revision of GDP growth in the period 2016- 2018. In addition, the INE has reviewed the Quarterly Accounting for the first half of 2019.
The Independent Authority for Fiscal Responsibility (AIReF) has endorsed the forecasts for the macroeconomic scenario.
The composition of growth is more balanced, with positive contributions from both internal and external demand. Thus, domestic demand will have an estimated contribution of 1.5 points in 2019 and 1.6 in 2020. For its part, the contribution of external demand improves and will be 0.6 points this year and 0.2 next .
This behavior is reflected in the balance of the Current Account Balance of Payments, which is expected to stand at 1.8% and 1.6% of GDP in 2019 and 2020. This will allow the economy's financing capacity Spain remains above 2% of GDP this year and next.
Economic growth will continue to generate employment, with full-time job creation rates of 2.3% and 2% in 2019 and 2020 respectively, which will allow the unemployment rate to continue to be reduced to 13.8% this year and 12.3% in 2020.
Deficit reduction
The Budget Plan transfers the Government's commitment to fiscal consolidation and the reduction of the public deficit. After closing at 2.5% last year and exiting the EU Excessive Deficit Procedure –which Spain was in since 2009-, the forecast for this year is that the deficit will decrease and stand at 2%.
The 2020 public deficit forecast is based on an inertial scenario that does not include any additional tax measure. In this context, the deficit would stand at 1.7% of GDP in 2020. In any case, the Government's intention is to present, whenever possible, an updated Budget Plan with the fiscal orientation already communicated in previous documents.
Public revenues will stand at 39.6% of GDP in 2020, reaching 512,032 million euros. In a scenario with constant policies, the estimate is that tax revenues register a growth of 4.8%.
The consolidation of the Spanish economy is also reflected in the surplus of the primary budget balance (without interest on the debt) which in 2020 is expected to be 0.4%, double that of 2019. An improvement that will allow progress to be made in reducing the public debt.
Social measures
The Budgetary Plan includes a revaluation of pensions in 2020 of 0.9% with the aim that pensioners do not lose purchasing power, as the Government has promised.
Likewise, the document also includes the salary increase for public employees agreed in the Union Agreement. This is the third year of compliance with said agreement, which for 2020 contemplates a fixed salary increase of 2%, plus a variable based on GDP.
