After the surge in deficits triggered by the Covid shock, Spain’s public finances entered a decisive correction phase in 2022. In the first quarter alone, the combined deficit across the state, autonomous communities, Social Security, and local governments narrowed to 21,489 million euros, marking a 60.5% drop from the 54,342 million euros recorded in the same period of the previous year. This pattern illustrates a rapid deceleration in spending growth relative to income, with revenues rising by 10.8% and total spending increasing only 1.8% during this period, signaling a meaningful shift toward fiscal stabilization.
Viewed as a share of GDP, the overall deficit for all administrations rose to 1.64% by the end of the third quarter, reversing a 4.50% level seen in September 2021. The trajectory shows a notable improvement in overall budget balance, yet the gains were uneven across government levels, highlighting the challenge of maintaining balanced public finances while preserving essential services and investment across the country.
The improvement was not uniform, however. The Social Security system experienced a dramatic contraction, falling from 6,780 million in 2021 to a mere 213 million in 2022 within the state sector, a reduction of around 76%, with some sub-sectors facing even sharper declines. In contrast, autonomous communities and municipalities did not achieve the same pace of deleveraging, and their deficits accumulated anew rather than shrinking proportionally. This divergence underscores how different governance layers faced distinct pressures and policy responses in the wake of the pandemic shock.
Regional self-government accounts show a deficit of 5,879 million through September 2022, a sharp contrast to their 8,323 million surplus in the same period of 2021. The shift from a positive position of 0.69% of GDP to a negative stance of 0.45% for that period highlights this change, reflecting how regional financing dynamics influenced the national fiscal picture.
October brought further variation across territories. Catalonia recorded a deficit of 1,523 million euros (0.61% of GDP) in October 2022 after a surplus of 1,613 million euros (0.70% of GDP) in the previous year. Other regions followed different paths: Murcia posted a deficit equal to 2.06% of GDP, the Valencian Community 1.86%, and Castile-La Mancha 1.69%. Some communities still posted surpluses, as seen in Aragon (0.05% of GDP), Asturias (0.52%), Balearic Islands (0.02%), Canary Islands (0.42%), La Rioja (0.29%), and the Basque Country (0.42%). Within Castile and León, the deficit rose to 0.15% of regional GDP, Extremadura reached 0.52%, Galicia stood at 0.14%, Madrid at 0.13%, and Navarre at 0.37%. These movements illustrate the uneven regional impact of fiscal adjustments and the ongoing challenge of aligning regional budgets with national priorities.
Locally, public corporations also shifted negatively compared with the prior year. They moved from a 2,306 million surplus (0.19% of GDP) at the end of September 2021 to a deficit of 1,374 million (0.10% of GDP) in the same period of 2022—an opposite trend within the local government landscape and a reminder that local financial health often runs counter to national-level improvements.
Overall, deficits across administrations grew relative to GDP compared with earlier years, increasing from 10.1% in 2020 to 6.8% in 2021. For the 2020 fiscal year, targets were around 5% of GDP, though the Bank of Spain later indicated a level nearer 4.1% for the near term. These dynamics emphasize the ongoing challenge of achieving cohesive fiscal consolidation while maintaining essential public services and investment across the country, and they illustrate how Covid-era shocks have set a complex path for Spain’s public finances moving forward.