• The macroeconomic picture foresees a GDP growth of 2.1% in 2019 and 1.8% in 2020, a pace higher than the EU average
  • The Independent Authority of Fiscal Responsibility (AIReF) has endorsed the forecasts of the macroeconomic scenario
  • Employment growth of 2.3% is expected 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% in order to maintain the purchasing power of pensioners and the agreed increase in the salary of officials by 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 adoption of a Draft Budget for next year or the update of the stability objectives. For this reason, the Government undertakes before Brussels to send an update of 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 uncertainty of an international nature, Spain continues to grow above the euro zone average and also does it 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 the adoption of any additional income measures.

On the expenses side, measures already announced to the European Commission are included in the Stability Program, such as the revaluation of pensions or the salaries of officials.

Macroeconomic chart

The Government expects a growth of the Gross Domestic Product (GDP) of 2.1% in 2019 and 1.8% in 2020. These figures reduce the growth forecast by one tenth for each year with respect to those included in the Stability Program, submitted on April 30. This modification is due almost entirely to the statistical review of the Annual National Accounts conducted by the National Statistics Institute (INE) corresponding to the period 1995-2018, which has led to 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 of 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 Balance of Payments for Current Accounts, which is expected to be at 1.8% and 1.6% of GDP in 2019 and 2020. This will allow the financing capacity of the economy Spanish 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 continue to reduce the unemployment rate to 13.8% this year and 12.3% in 2020.

Deficit reduction

The Budget Plan moves 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 – in which Spain had been since 2009 -, the forecast for this year is that the deficit decreases and stands at 2%.

The 2020 public deficit forecast is based on an inertial scenario that does not include any additional tax measures. In this context, the deficit would be 1.7% of GDP in 2020. In any case, the intention of the Government is to present, at the time possible, an updated Budget Plan with the fiscal guidance already communicated in previous documents.

Public revenues will reach 39.6% of GDP in 2020 until 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 in 2019. An improvement that will allow progress in reducing the public debt.

Social measures

The Budget Plan includes the revaluation of pensions in 2020 by 0.9% with the aim that pensioners do not lose purchasing power, just as the Government has committed.

Likewise, the document also includes the salary increase for public employees agreed in the Trade Union Agreement. This is the third year of compliance with this agreement, which by 2020 contemplates a fixed wage increase of 2%, plus a variable based on GDP.

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