COVID-19: A tsunami for public finances
Fecha: mayo 2020
Santiago Lago Peñas
COVID-19, Déficit público, Política económica
COVID-19 has placed considerable pressure on Spain’s public finances, further complicating the outlook for the country’s fiscal consolidation. Though much of the deficit reflects the impact of the recession and the costs of one-off fiscal measures, there remain s an important structural component.
Abstract: Economic figures published in April by Eurostat suggest that Spain’s fiscal consolidation experienced a setback in 2019. Unfortunately, this setback will become substantially greater given the economic paralysis caused by COVID-19. The uncertainty surrounding the COVID-19 crisis makes forecasting both growth and the deficit extremely difficult and has contributed to a wide range of forecasts published by the Bank of Spain, the European Commission, the AIReF, the IMF, BBVA and Funcas, among others. These institutions have forecasted a GDP contraction of between 6.8% and 12.4% with the public deficit ranging from 7.2% to 11.0%. Though much of the deficit reflects the impact of the recession and the costs of one-off fiscal measures, there remains an important structural component. Indeed, structural deficit is among the highest in the European Union, with the EU Commission calculating a cyclically-adjusted budget deficit for Spain at slightly over 3% in 2020.