The acting Government sent to Brussels this Sunday, on the last day of the deadline as usual, its Budget Plan for 2024. It does not contemplate the extension of anti-inflation aid that is in force until December 31 of this year . But the Executive points out that the fact that they are not “does not presuppose that in the future they cannot adopt or extend the measures” with the aim of mitigating the impact of inflation “in the event that it is considered necessary after evaluating the situation with the data available at the end of the year. It justifies that an acting Government has limited regulatory capacity, but it does contemplate other spending measures because it understands that they will be adopted “in any scenario”: This is the revaluation of pensions in accordance with the CPI as established by law and the increase in the remuneration of public employees for 2024, according to the agreement of the Public Function Board.
If it is always difficult to adjust the reality of macroeconomic and fiscal numbers to the objectives, the Executive this time encounters several obstacles. The first is that the new Budget Plan catches the Government in office, the second is the increasingly exacerbated geopolitical conflicts that increase uncertainty and instability, conflicts that also do not help control inflation. Prices began an escalation that does not help when it comes to withdrawing the public aid approved to face the energy and inflation crisis derived from the war in Ukraine. And inflation had been reducing in the previous months until falling below 2% in June, which is the objective set by the European Central Bank (ECB).
The latest data that has been known is that of September, with an inflation of 3.5% in which the inflation related to food is of concern, which continues to skyrocket at 10.5%. Neither the fuel subsidy for transporters, nor the decrease in the price of electricity and not even the VAT reduction on basic foodstuffs that came into force on January 1 has managed to sufficiently reduce the price of the grocery shopping basket. the Spanish. Therefore, in a scenario like this, withdrawing these measures and starting next January households pay more for food was a difficult decision to make in a context of Government formation or even pre-election if the investiture of Pedro Sánchez does not give result. It would not be easy to ask for a vote after withdrawing current aid. The Executive recalls that more than 47 billion euros have been mobilized to respond to the war in Ukraine and its consequences.
An amount that international organizations consider impossible to maintain. And the acting Government has been applied and does not contemplate its extension in the Budget Plan sent to Brussels. In any case, the Executive plans in its Stability Program to reduce the public deficit to 3% next year, which would comply with the European fiscal rules that will probably be approved before the end of the year, and place the public debt at 108, 1% of GDP in 2023 and 106.3% in 2024. The International Monetary Fund (IMF) in its latest Fiscal Monitor made public this week supports that Spain can reduce the deficit to that 3% in 2024 and lower the debt. But what they warned from the IMF, from the Fiscal Authority (Airef) and from the European Commission is that to reduce the public deficit, the Government has to eliminate fiscal aid or adjust it so that only very specific vulnerable groups receive it.
Growth
At such a complicated time on a geopolitical level, with high uncertainty about how the war in the Middle East will develop and the consequences that this will have for the price of crude oil, the Government has updated its macroeconomic picture and worsens the growth forecasts it It had estimates for 2024. In the Stability Plan presented to Brussels, it recognizes that Spain will grow only 2% next year, four tenths below its April calculations. Even so, it is a more optimistic forecast than what economic organizations have made in recent weeks.
The European Commission will give its opinion in November and Spain must take it into account before approving its Budgets
The last was the International Monetary Fund (IMF), which last week cut its growth forecast for 2024 by three tenths to 1.7%. The Bank of Spain predicts that the country will grow by 1.8% and the OECD, 1.9%. All below the forecast that the Government gives to Brussels on this occasion.
It will be a growth higher than the average of the euro zone, which according to the IMF will remain at 1.2%, with countries like Germany (0.9%) or Italy (0.7%) growing less than half that of Spain . For this reason, the Government assures that “in such a complex international context, Spain will lead economic growth among the main developed countries thanks to the deployment of the Recovery Plan and the effects of the economic policy adopted in the last five years.”
Normally the Budget Plan is sent to Brussels at the same time that the General State Budgets are processed in Congress. This year, with a Government in office there are no Budgets, although the Minister of Finance, María Jesús Montero, has indicated that if Sánchez is inaugurated she wants to send the Budgets to the Spanish Parliament in January.
In November, the European Commission will give its opinion on the countries’ budget drafts and they will be discussed at the Eurogroup in early December. Spain must take into account the opinions of Brussels and the Eurogroup before approving its public accounts.
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