Page 28 - Economic report 2020

(“Iberian exception”). At the same time,
SPAIN'S PUBLIC DEFICIT* underlying inflation (excluding unprocessed
As % of GDP Chart 3.3 food and energy products) crept up, as costs

were transferred to end prices in the other
products in the basket of consumer goods,
reaching 7% in December. For now, there
appears to be no risk of a wage-price spiral, as
wage increases are fairly contained, although
this is affecting household consumption, as
they see their purchasing power reduced.

In the sphere of public finance, the Spanish
f: European Commission forecasts (May 2023). economy managed to reduce the public deficit
*Includes aid to the financial sector.
in 2022, to 4.8% of GDP, after it had climbed to
Source: Eurostat.
10.1% in 2020 due to the major budgetary effort
to tackle the economic effects of the pandemic
Spain has reduced the public deficit but (temporary employment regulations (ERTE/
retains a high level of public debt. ERTO), self-employment support, minimum
income scheme, etc.). Part of this decrease can
be explained by the strong GDP growth in 2021
and 2022 (unlike in 2020), and another part can basically be explained by the increase in tax revenue
linked to economic activity and rising prices (revenue rose 8.1% and expenditure 3.8%). The trend
in the public deficit was more positive than the target set by the European Commission for this year
(5% of GDP), thanks to the strong recovery in the labour market and high economic growth, which
boosted fiscal revenue.
26
Nevertheless, the public debt of the Spanish administrations as a whole continued to rise to 1.5
billion euros by the end of 2022, 5.3% more than the previous year. This level of debt is equivalent
to 113.2% of GDP, almost 5 points less than in the same quarter of the previous year. The debt
reduction as a proportion of GDP can be explained because the nominal rise in GDP was 10%,
much higher than the nominal debt increase (+5.3%).

2. Prospects
External environment of the Andorran economy | III. Spanish economy
Although predicted growth for 2023 is lower GDP growth will moderate in 2023
than for the previous year, the economic but less than initially forecast.
forecasts have been revised upwards and the
Spanish economy will be one of the larger
Eurozone economies presenting higher growth. Spain’s major specialisation in the services sector,
especially tourism; the smaller rise in energy prices thanks to implementation of the “Iberian
exception”; the impact of the labour reform; the implementation of the NextGenerationEU funds
- which it is calculated will have a positive impact of between 1.5 and 2 GDP points, and the
economic policies that have been introduced - such as VAT reductions on some products, the
monthly €200 support for vulnerable families,
free transport passes, the extension of energy Spain will be one of the European
tax cuts, and the increase in the minimum wage economies to grow most in 2023,
and pensions - have positioned Spain favourably
within the European context. despite high uncertainty.

As a result, the rate of growth of the Spanish economy in 2023 will climb above 2% (the
International Monetary Fund (IMF) revised its forecast in July to 2.5%), whereas forecasts pointed