The improvement in collection compensates for the economic slowdown, although the fiscal hole will not drop below 3% until 2025
The drastic adjustment in the Government’s macroeconomic framework -with a cut in the GDP estimate for this year from 7% to 4.8%- could have unleashed the fear of a greater imbalance in the public accounts and, therefore, in the General State Budgets (PGE) approved for this year.
However, the economic slowdown has not prevented the Executive from maintaining its objective of closing this 2022 with a public deficit of 5%, thanks to the increase in collection that, according to the Minister of Finance, María Jesús Montero, “is due in a 80% to job creation and economic growth» experienced during the past year.
Montero thus defended himself against the analyzes and criticisms that suggest that the spectacular increase in income, which in 2021 soared 15.1% (and 5% compared to 2019), is due only to the effect of inflation, « which is only responsible for a small part of the rise.
Against this background, in the Stability Plan sent this Friday to Brussels, the Government will maintain a downward path of the deficit, after the good evolution already registered in 2021, when the reference ended at 6.8% compared to 8.4% estimated at first. For 2023, the figure would drop to 3.9%, from the 4% that was pointed out in the previous forecasts, to drop in 2024 to 3.3%.
It would already be in 2025 when, with a reference of 2.9%, the deficit would be below the 3% limit established by the Brussels fiscal rules. Rules that have been suspended since the pandemic and which are expected to be reformed to adjust to the new reality.
For its part, the public debt will end 2022 at 115.2%, one tenth more compared to the previous estimate, as forecast by the Government, and will drop to 112.4% in 2023, 110.9% in 2024 and 109, 7% in 2025.
As Montero explained, the reduction in the deficit allows the cost of the measures to deal with the impact of the war to be comfortably assumed. The forecast, according to the minister, will exceed 42% of GDP this year (43.1% of GDP in 2021), offsetting the expected increase in spending. For now, the data is in line with forecasts. “Some forget that the behavior of 2021 has allowed us to start 2022 with a much more solid base than we had planned, with nearly 9,000 million euros of collection more than expected,” they indicate from the Ministry.
For now, the data for the first months of the new year call for optimism in this regard. According to figures published this Friday, the State deficit stood at 0.44% of GDP, compared to 1.22% in the first quarter of 2021.
In this way, the deficit stands at 5,811 million, which represents a decrease of 60.4% compared to the 14,665 million in the same period of the previous year. “This result is due to a solid increase in non-financial income of 17.2%, compared to the behavior of expenses, which decrease at a rate of 1.5%,” they indicate from the Ministry of Finance.
Non-financial resources stand at 54,114 million, which is 17.2% more compared to the same period in 2021. Taxes stand at 46,785 million euros, 86.5% of total resources, and grow by 18.2% compared to the first quarter of 2022.
Taxes on production and imports increase by 16.3%. Specifically, VAT revenues rose by 18.5%. Current taxes on income and wealth grew by 22.2% due to Personal Income Tax, which increased by 22.2%, and the increase in Corporation Tax, which rose by 11%. For its part, the Non-Resident Income Tax is increased by 52%.
Likewise, taxes on capital grew by 70.4%, compared to the same period of the previous year and income from social security contributions decreased slightly by 2%.
“This year the tax pressure will drop slightly, but it will not increase. Although the collection will rise, it will be lower than the nominal GDP, so the fiscal pressure ratio will drop to 38.3%, “explained Montero during the presentation of the new macroeconomic table of the Government.
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