Across the autonomous communities, the year 2022 is expected to close with a public deficit of about 1 percent of regional GDP. The figure surpasses earlier July projections but is anticipated to improve notably, narrowing to roughly 0.1 percent in 2023, according to forecasts from the Independent Authority for Financial Responsibility (AIReF).
On Friday, AIReF released its assessment of local business conditions, alongside dedicated analyses of projects and key budget items for 2023 across the autonomous communities.
In terms of revenue and spending, AIReF updates its outlook upward, based on observed implementation data to date, provisional 2021 outcomes reported by the communities, and the latest measures, excluding the Recovery, Transformation and Resilience Plan (PRTR) in both cases.
For 2022, the forecast points to higher revenue collection, primarily driven by property transfer taxes, documented obligations, and European funds.
Looking ahead to 2023, AIReF expects a general improvement in the sub-sector by about 0.9 percentage points, supported by an extraordinary boost in resources from the financial system. Growth in receipts and, more importantly, in payments, is projected to turn positive after a notably negative year.
The new projections indicate improved 2022 outcomes for Andalusia, while several regions show a softer outlook, including Aragon, Asturias, the Balearic Islands, Cantabria, Castilla y León, Castilla-La Mancha, Catalonia, Extremadura, Madrid, the Region of Murcia, Navarra, La Rioja, and the Valencian Community.
For 2023, Aragon, Asturias, the Balearic Islands, the Canary Islands, Cantabria, Castilla y León, Extremadura, Galicia, Madrid, Navarra, the Basque Country, and La Rioja may end the year with a surplus or a balanced position, or with a modest deficit similar to Andalusia.
Castilla-La Mancha could reach a balance near the regional benchmark, while Catalonia might register a slightly larger deficit, with only the Community of Murcia and Valencia still expected to show deficits exceeding 1 percent of regional GDP.
In the medium term, AIReF forecasts a temporary surplus of about 0.4 percent of GDP in 2024, followed by a gradual return to balance by 2026.
Regarding local companies, AIReF maintains its 2022 surplus estimate at roughly 0.2 percent of GDP, increasing to about 0.5 percent for 2023.
The projected strength in local revenues arises from activity-related incomes, even as the financing system’s liquidation pressures persist and are compounded by rectifications for negative settlements in 2020, with compensations scheduled between 2022 and 2024 to bolster capital reserves.
Despite these adjustments, the 2022 outlook for local governments reflects an improved performance in revenues and a solid starting point for 2023, driven by activity-driven income and supported by ongoing compensations tied to prior settlements.
For 2023, AIReF sees a surplus of about 0.5 percent, assuming annual expenditure growth stays just above 2 percent while revenue projections exceed 7 percent.
Among the larger local entities, AIReF notes that nine major bodies could finish 2022 with a deficit, factoring in the liquidation impact. Examples include projections for the Cabildo of Tenerife and the City Council of Barcelona due to higher income shares, along with several provincial councils in Madrid, Murcia, Córdoba, Valladolid, Gijón, Valencia, and Seville.
Of the 24 large entities studied, 13 forecast a deficit for the year, though many did not fully account for the 2020 liquidation effects or the positive repercussions of the 2020 settlement in their forecasts.
In parallel, projections from these entities suggest an average expenditure growth of around 12 percent for 2022, with some councils forecasting steeper increases: 20 percent for provincial councils, about 50 percent for the Tenerife Council, roughly 30 percent for Vigo, and around 22 percent for Córdoba.