Public revenue and expenditure forecasts for 2024 under a no policy change scenario
Fecha: noviembre 2023
Desiderio Romero-Jordán
Fiscal outlook
SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 6 (November 2023)
Growth in total state revenue is expected to slow from 6.7% to 5.8% in 2024, despite: (i) expiration at the end of 2023 of tax breaks on energy and food products worth 8.4 billion euros; and, (ii) a 6 billion euro boost from temporary taxes (on the financial and energy sectors and large fortunes) and a reduction in parent-subsidiary loss offsetting in 2024. Growth in public expenditure is forecast to slow from 5.0% to 3.8% in the coming year, also supported by the expiration of over 9.1 billion euros of professional and sector-specific assistance and fuel subsidies. However, wage and state pension increases will raise structural spending by around 12 billion euros in 2024. In short, delivery of the targeted budget deficit of 3.0% of GDP will prove a challenge for the new government in the year of reinstatement of the EU fiscal rules, severely limiting its ability to introduce new measures to support households or corporations in 2024 without running the risk of missing its deficit target. Moreover, the government will have to overcome additional obstacles on its path towards fiscal consolidation, including maintaining a cap on public spending in line with EU recommendations, servicing the higher interest burden on public debt, and financing growing pensions expenditure under the current inflationary climate, resulting in a greater opportunity cost for other necessary policies.