Pointing to the “lack of realism” of the budgets, the agency calculates that expanding anti-crisis measures would push the deficit to 4.4% by 2023
The Fiscal Authority (AIREF) reiterates its assessment of the general budgets as “far from reality” despite the controversy that arose after the harsh intervention of the body’s president, Cristina Herrero, in the Congress of Deputies a few days ago. In an extension of their public accounts report presented this Tuesday by the independent body, they point out that the government’s revenue forecast will be exceeded as these data would imply a collection evolution that is “inconsistent” with the numbers. those in the first three quarters of the year.
At a press conference, Herrero emphasized that this “lack of realism” comes not only from the revenue side, but also from the expenditure side. The budgets presented do not take into account the extension of any of the measures taken to mitigate the effects of the war (lower VAT on electricity, fuel subsidy, 2% limit on rent increases, etc.), but the chairman emphasized that only fifteen days after the submission of these accounts, a document was sent to Brussels with a different scenario that includes the extension of these measures due to increased expenditure, although this has not been finalized either.
In this sense, they believe that this new scenario proposed to Brussels is “closer to reality”, albeit with a lower level of expenditure than Airef’s forecast. Government estimates point to spending growth of 3.6% in 2023, while the agency calculates 4.2% even without taking into account the extension of the measures.
For this reason, they calculate that if the anti-crisis measures are extended, the government deficit cannot be reduced at the rate proposed by the government in 2023. According to their calculations, the deficit would skyrocket to 4.4% of GDP, half a point above the budgetary projections. Moreover, in the absence of additional measures, the government debt-to-GDP ratio will stabilize at around 110% of GDP from 2025, impacting Airef, which would entail “high opportunity costs” and put Spanish finances in a “very vulnerable” position. situation in a context of rising interest rates.
Airef notes that activity “virtually stagnated” in the third quarter. Preliminary GDP data for that period by the INE will be released next Friday, but the agency estimates it will be around 0%.
It is more pessimistic for the fourth quarter of 2022 and the first quarter of 2023. He calculates that the loss of dynamism in social security affiliation, the sharp deterioration in business confidence indicators and the very negative behavior of the economy in the rest of Europe indicate that in the last quarter of the year and the first of the coming year -0.2% or -0.3%.
We would, at least technically, enter a recession. The definition of a technical recession has been negative for two consecutive quarters, although Esther Gordo, director of Airef’s Economic Analysis division, said it will be negative by only a few tenths and an economic recovery is expected from spring 2023. That’s right, the Spanish economy won’t recover to pre-pandemic levels until early 2024.
At the inflation level, Airef calculates that it will remain at 3.9% in 2023, a much more moderate level than the 8.9% forecast for this year, but taking into account the extension of the anti-crisis measures. Otherwise, his estimate would rise to 5% or 5.5% of the IPC next year. In addition, core inflation will remain at very high levels (around 4%) next year due to the gradual pass-through of cost increases in other prices and the acceleration of employee compensation.
Source: La Verdad
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