On Wednesday, several Spanish media citing the Ministry of Finance reported that Spain achieved its 2023 deficit target, closing the year at 3.64% of GDP- slightly below the provisional 3.66% forecast advanced earlier last week and the 3.9% forecast committed to the European Commission-, and sealing the fourth consecutive year Spain has met its commitments to Brussels.
Since the outbreak of the COVID Pandemic in 2020, Spain has reduced its deficit by 60 million Euros. The reduction in deficit was attributed by the Ministry of Finance to 2.5 % economic growth in 2023 (5 times the Eurozone average), strong employment dynamics, and the strengthening of the welfare state.
Economic growth has been favoured by a 2.8 % reduction in inflation owed to lower electricity prices and moderate increase in food prices in two Years. Coupled with an increase in wages by 4.8% by the end of 2023, lower inflation has strengthened purchasing power.
This economic recovery is still felt in the early 2024 figures. In January 2024, robust tax revenue drove the deficit of Spanish public administrations by 8%, down to 5.511 billion Euros, ( 0.36% of GDP).
With a 110% debt-to-GDP ratio, Spain’s most daunting economic challenge has been public debt. In a report published last Monday, the European Commission urged Spain to make more efforts to tighten its budget in order to reduce its high public debt, as reported by 20 Minutos and Benzinga España.
In this report, the Commission acknowledged certain steps have been taken on the road to recovery and attributed the reduction in the debt-to-GDP ratio to “strong” economic growth, yet it called for further adjustments to mitigate a deficit that is expected to fluctuate, in the coming years, slightly above 3% of GDP, the maximum limit allowed by European fiscal rules.
Fatma Harzalli
