IMF forecasts deficit in Spain to remain above 4% for another five years

In an environment of GDP growth revised upwards for this year, the IMF predicts that the overall government deficit will fall from 6.9% in 2021 to 4.9% of GDP in 2022. This guess in line with what has been done by StateProjecting a deficit of 5% for this year .

The divergence explodes in 2023 and lasts until 2027. The government predicts the deficit will fall to 3.9% of GDP in 2023 and fall again in 2024 (3.3%), reaching 2.9% in 2025, which is the current 3% below reference. The extreme open procedure of the European Union. IMF is not that optimistic. The deficit will remain for the next five years, according to the body led by Kristalina Georgieva. Above the 4% mark (4.2% in 2024 and 4.1% in 2025, before rising again to 4.3% in the next two years).

Such an evolution in the deficit will hurt public debt, which according to IMF estimates will still be set at 109.6% in 2027.

Global debt 91% of GDP

“The deficit and debt have decreased in 2021 and 2022, but remain. above the levels pre-pandemic“Continues the IMF with a sentence for the group of countries, which also applies to the example of Spain. Global public debt will remain at 91% of GDP in 2022, still 7.5 percentage points above the pre-pandemic level “Approximately 60 Lowest income earners A percentage of economies are already at risk or at high risk of over-indebtedness, underlining the need for a robust debt relief framework,” he warns.

The reduction in deficit and debt in 2021 and 2022 is putting less pressure on public accounts from the pandemic, as well as “surprise inflation“, which contributes to reducing the deficit and debt (due to higher incomes and increase in nominal GDP). But – in the context of high inflation, high indebtedness, rising interest rates and high uncertainty – the IMF warns for all economies in general – economic policies should “prioritize” financial and macroeconomic stability and not entrust correction. Indicators of the persistence of the increase in prices that need to be corrected.

IMF expects this The public deficit in the euro area will fall to 3.3% in 2023 It will be above the level of Spain, with GDP reaching 5.6% in France (from 3.8% in 2022) or 4.8% in Belgium. For Germany, a deficit of 2.5% is expected in 2023, before falling to 0.5% in 2027.

Against widespread tax cuts

Following the rising strain on public accounts resulting from the demands of the pandemic, the current account increased cost Energy and eat Demanding once again the adoption of public measures by governments, gradual return to financial stability. The IMF found that 750 measures were adopted in a total of 174 countries in the first half of 2022 to control food and energy prices. Most of the measures consist of reducing indirect taxes and rates and subsidies on energy prices.

The IMF takes advantage of the publication of its ‘Financial Monitoring’ report to underline it once again. public assistance against inflation should focus on strengthening “social protection networks” Avoid general measures in favor of the most vulnerable groups and for the population as a whole. Instead of tax cuts, which the IMF describes as “expensive” and “ineffective”, it advocates, for example, reductions in basic services in favor of disadvantaged groups.

The organism too questions measures such as energy tax cuts or direct aid (such as 20 cents per liter of fuel applied in Spain, which is not explicitly stated) because the IMF believes that market “price signals” should not be distorted. He highlights that such measures feed back inflation and lead to a greater “revenue transfer” in favor of fossil fuel producing countries.

In addition, the organization underlines the convenience of countries designing medium-term financial stability plans, as they can serve to limit the upward pressure on interest rates in the monetary policy decisions adopted by banks against inflation. During periods of high inflation, policies to control food and energy prices should not increase aggregate demand. to climb interest rates even moreincreases the cost of public debt for governments. Restrained fiscal policy sends a strong signal that politicians are in the league [con los bancos centrales] in the fight against inflation.