More deficit, the same unemployment and less growth in 2020

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The Government makes bobbin lace with the accounts, it disdains itself and corrects its own numbers in mid-October. The ministers Calviño and Montero they defend the robustness of the Spanish economy, but their forecasts show concern or, at least, that the horizon is not clear. The Government of Pedro Sánchez, in its new stage of meetings on Tuesday, approved the large macroeconomic figures that serve as a starting point to prepare the General State Budgets of 2020 that, if all goes well, they would be approved “before the end of the summer,” according to María Jesús Montero, head of the Treasury and Executive Spokesman.

Calviño and Montero, in bad weather, explained and defended yesterday the forecasts of the Government, which under the umbrella of the objective of reducing the deficit and debt, without jeopardizing employment and employment. Welfare state, hide many unknowns. The large figures are a self-amendment to the totality of the current forecasts of the Government. The new scenario raises the deficit for 2020 1.8% of GDP, compared to the previous 1.1%, already revised upwards in its day, which represents a deviation of about 8,800 million. The economy would grow 1.6%, two tenths below the estimated in autumn, and unemployment would barely drop – in practice it would remain the same – as it would be around 13.6% of the active population, compared to 13.7 % of end of 2019. Governmentalso has given the green light to 127,609 million euros of the so-called “non-financial expenditure ceiling”, which would mean a 3.8% increase over a comparable figure in 2019. In practice, there are 4,700 million more for spending, which would reach 8,800 if a deficit of 1 is approved, 8%

The Ministers Calviño and MonteroIn the public presentation of these accounts, they tried to make it clear that the Government wants to be “aligned with the fiscal rules of the European Union», Which will have to give approval to these numbers. However, not everything is so obvious. Spain had pledged to reach, more or less, the budget balance, something that now does not appear in the Government’s plans for the entire legislature, since foresees that in 2023 the deficit will still be 0.9%, and that provided that all your current forecasts have been fulfilled. It all depends, in any case, on the one hand, on Nadia Calviño getting Brussels – and most likely – admits to being more flexible with Spanish accounts. On the other hand, the Government needs the express support – the favorable vote – of ERC and wants to have it guaranteed before sending the Budgets to the Congress. Minister Montero explained that the contacts and conversations to achieve that support will mark the calendar and from her words it could be deduced that without this explicit support the accounts will not even reach Congress. That is, without ERC there are no budgets

Taxes and unknowns

The numbers presented by the Government accumulate unknowns. The first is that there is still no revenue forecast data, in a economic slowdown scenario. Expenditure grows, GDP falls, the deficit skyrockets and debt – the Government says – falls. Everything leads to a tax increase, which Minister Montero does not deny, although she rejects that tax measures will be applied retroactively. That means that, if the Budgets are approved at the end of the summer, although there are taxes that accrue at the end of the year, the revenue increase in 2020, including new taxes, will be very limited. That would mean additional increases in the deficit, which would have to be compensated with more debt, which would prevent its reduction in the terms foreseen in the macro chart outlined yesterday. The Government, however, seems to trust everything on three points: 1) private consumption – families and companies – would grow 1.5%, four tenths more than in 2019. 2) Public investment (Gross Fixed Capital Formation) is would collapse from 2.4 to 1.3%, and 3) Inflation, not quantified, together with the rise in GDP, would improve the proportion of public debt up to 94.6% of GDP, more than two points less than in the year just finished. However, in absolute terms it would rise above 1.25 billion euros. The Government also expects that, in 2023, the debt will remain at 89.9% of GDP, something that contrasts with the latest forecasts of the European Union, which estimate that, in 2030, the Spanish public debt will still be around 95, 7% of GDP.

The government wants to put a good face on bad weather, but there are telling signs. Discard advance – refers to March 30 – the 2019 deficit forecast, which could break out above 2.5%. It does not explain how income will increase this year and argues that the Spanish economy will grow more than that of the large Euro countries. In addition, Minister Montero, before the regional semi-rebellion for VAT not received, admits “rigidity” in the spending rule when communities and municipalities comply and have surpluses.



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