The IMF places Spain's deficit above 4% for five years

The International Monetary Fund (IMF) maintains that Spain will keep the public deficit skyrocketing at least until 2027, when it will still be above 4%.

Thomas Osborne
Thomas Osborne
13 October 2022 Thursday 01:46
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The IMF places Spain's deficit above 4% for five years

The International Monetary Fund (IMF) maintains that Spain will keep the public deficit skyrocketing at least until 2027, when it will still be above 4%.

The disagreement with the Government data is due to the calculation of the sharp rise in pension spending, which next year will account for 42% of the total spending of the general budgets.

The IMF, in its fiscal surveillance report published this Wednesday in Washington at the annual meeting with the World Bank, lowered its public deficit forecast by four tenths to 4.9% of the Gross Domestic Product (GDP) this year.

So far the good news, because this reduction, with respect to the forecasts that the Fund itself made in April, contrasts with the forecasts that in the next five years the reduction of the deficit will be much slower than that forecast by Moncloa .

The financial institution forecasts a 4.4% imbalance in public accounts for 2023, and 4.2% for 2024. Balancing the accounts will be more complex than the government anticipated.

The Stability Program that the Executive sent to the European Commission outlined a horizon in which the deficit would be 5% this year, 3.9% in 2023, and 3.3% in 2024. Many tenths of a difference with respect to the predictions of the IMF. So as that panorama expands, year after year the differences between the Government's economists and those of the Fund grow.

"Since 2018 we have met our objectives and commitments to reduce the public deficit and debt on a path of fiscal responsibility that was interrupted by the pandemic, but which we will resume in 2021", stressed the Vice President of Economic Affairs, Nadia Calviño , on his visit to New York, a stop prior to his participation in the meeting in Washington.

“We are taking advantage of growth and job creation to reduce the deficit and public debt. This confidence in our fiscal policy is one of the elements that we are going to try to confirm in these meetings”, he added.

However, the IMF has another vision of Spain's horizon, with a deficit that is entrenched instead of being reduced, as the Government maintains. The difference between the forecasts of the Executive and the Fund represents more than 40,000 million euros in the next three years, according to those responsible for the Fund.

If the European environment is observed in terms of the deficit, Spain is always above the forecasts for the euro zone. Germany, Italy, Portugal or Greece present better figures, although Belgium and France worsen them.

In its forecast of economic growth, the IMF cut that of Spain to 1.2% in 2023. But that percentage is still better than that of the countries in its area, with a Germany that was predicted a contraction of three tenths .

The Fund expects Spain to reduce its debt to 109% in 2025 and continue at that level in 2026 and 2027. In no case will the pre-pandemic minimum of 98.3% be reached in 2019.

Sources from the Ministry of Economy pointed out that these predictions "confirm the fiscal responsibility of the Government." And they clarified that "the expected reduction path is in line with that established in the Stability Program, which assumes that the ratio will be close to 112% by 2023".

Spanish debt will thus continue to be among the highest in the eurozone. It is still far from the figures projected for Italy (147.2% of GDP in 2022) or Greece (177.6%).