The debt burden of public administrations will increase by 75,267 million euros in 2022, although the ratio compared to gross domestic product will fall by five percentage points thanks to economic growth and inflation
The debt of public administrations is measured in two ways: in millions of euros, that is, in absolute values, and in what it weighs in relation to the national wealth generated each year (what we know as GDP). Government debt, along with GDP, is the indicator that best reflects the health of an economy. The Bank of Spain published this Friday the close of the year 2022 in the national debt and, like almost everything, it offers two faces. A very positive one: public debt to gross domestic product (GDP) stood at 113.1%, five points below the previous year’s level of 118.3% of GDP, and more than two points below the target set by the government in the budget plan, which was 115.2% of GDP. In relative terms, this decline continues the downward trend also recorded in 2021, when it fell by two percentage points relative to GDP.
And another side that is not good at all: in absolute terms, public debt continues to rise, rising 5.3% last year to 1,503 trillion euros, according to preliminary data from the Bank of Spain. In December, public debt grew by EUR 75.267 million compared to the same month of the previous year, although it decreased slightly compared to November.
The reason for the government debt-to-GDP control lies in the higher growth of gross domestic product and especially inflation, which increases tax revenues. Last year GDP grew by 5.5% and CPI by 5.7%. In turn, higher government spending on aid after the invasion of Ukraine is one of the main reasons for the increase in absolute values.
In early 2024, the European Union restores fiscal rules requiring government debt to be reduced to 60% of GDP and the deficit to 3%; These rules were suspended at the beginning of the pandemic, in March 2020, in the so-called Stability and Growth Pact to give EU countries the space to fight the economic fallout of Covid-19.
The scenario proposed in the 2022-2025 Stability Program shows a gradual decline over the four years until the debt-to-GDP ratio reaches 109.7% in 2025. For this year 2023, the debt target is set at 112.4% of GDP, very close to the one finally registered in 2022.
The Vice President of Economic Affairs and Digital Transformation, Nadia Calviño, stressed that “thanks to strong economic growth and responsible fiscal policies”, the debt-to-GDP ratio has improved. For Calviño, it “affirms our government’s strong commitment to fiscal responsibility and the efficient management of public resources.”
Within the public services, the increase in social security debt, which already exceeds one hundred billion euros, is striking: it rose by 9.3% to 106,000 million euros. This increase is due to the loans granted by the State to the General Treasury of Social Security to finance the budget imbalance.
Public debt grew by 6.9% in the year to EUR 1.331 trillion, while the debt burden of the Autonomous Communities remained more contained as it only increased by 1.4% to EUR 317,000 million at the end of 2022. The debt of local corporations amounted to 23,066 million euros, 4.5% more than in 2021.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
