The Community of Valencia closes fiscal 2021 as the largest structural deficit in Spain and autonomy five times the national averageAccording to the report presented this Monday by the Foundation for Applied Economics Research (Fedea). The document breaks down the budget balances of the autonomous communities into its cyclical and structural components for 2020 and 2021 and recalculates what the level of indebtedness would be without the impact of covid aid and the State and liquidations. other operations are not repeated.
Fedea reminds that this indicator should not be confused with “underfunding,” although it recognizes the relationship between attracting more funds and presenting lower deficits or even surpluses. Thus, he defines the structural balance as “a balance that reflects discretionary spending and revenue decisions taken by governments” and reminds that this balance is structured as follows today. The main variable on which European and Spanish tax rules revolvenow on hold but “sooner or later they will get better one way or another”.
The agency underlines that the Autonomous records “the best financial results of the entire historic series”, but warns that they can “present a skewed picture of the true financial health of public accounts”, altered “with the impact of covid-19 and the economic cycle”.
Thanks to these economical injections, The average structural balance of the autonomous regions improves significantly within a year, falling from -1% of GDP in 2020 to -0.4% in 2021.. However, despite receiving this financial oxygen due to the pandemic, which in the case of Valencia reached 2,047 million euros, Valencian Community remains committed to -2% of GDP for the second year in a row and widening the gap relative to the rest of the region. In other words, Consel allocated this extra income to increase spending and reduce the deficit, according to Fedea. As a result, it is the only autonomy with La Rioja and the Balearic Islands that has not improved its structural balance compared to 2021.
At the top of the list is the Canary Islands with 1.3%; Navarre, 0.8%; Balearic Islands with 0.6%; and Basque Country, 0.5%. Also, Asturias and Cantabria get 0.3% of GDP, while Madrid gets 0.1%. The total structural balance of autonomous communities was -1.0% of GDP in 2020 and -0.4% in 2021.
In the report, Fedea calculated the independent balance of the economic and clean cycle of non-recurring operations. To do this, it started from the budget balance of the regions, which was -0.2% of GDP in 2020 and -0.3% of GDP in 2021, amounts representing the best financial results of the entire historical series.
However, Fedea said that these two exercises “Greatly affected by non-repeat operations due to the Covid-19 pandemic”. These operations meant an extraordinary increase in income for the autonomous due to transfers from the State to mitigate the effects of the pandemic. “false image of sound financial accounts”.
Accordingly, he warned that communities were not clearing their financial accounts despite good data at the end of 2021 and recommended it after the recession caused by the COVID-19 pandemic and the resulting war crisis. Think in Ukraine “Fiscal consolidation measures to reduce the existing structural deficit in its accounts”.
“The change in structural balance depending on whether liquidations are assessed at some point in time is an indication that Autonomous Communities are using resources produced in previous cyclical moments to finance permanent expenditures in the current year,” Fedea said. .
Therefore, once the recession caused by the covid-19 pandemic and the new crisis caused by the Russian invasion of Ukraine are overcome, communities “should consider fiscal consolidation measures in their accounts that reduce the existing structural deficit,” he said. comes to the conclusion.