The public deficit continues its downward path and stands at 1.9% of GDP until November

The turmoil has not ended, but the main economic magnitudes have already recovered or are on their way to recover pre-pandemic levels. The public administration deficit, that is, the difference between what is received and what is spent, is one of them. In 2022 it decreased at a higher rate than expected, and stood at 1.9% of GDP until last November, according to the latest available data published this Monday by the Ministry of Finance. This result is 60% lower than that registered during the first 11 months of the previous year, and anticipates a better year-end than projected in official forecasts (5%). Even so, it represents a hole of 25,832 million euros, more or less two months of pension payroll or the annual collection of corporate tax.

We will have to wait for the December data to find out how far the forecasts, both from the Government and from international organizations and analysis houses, have moved away from reality. All this knowing that the last month of the year usually has a considerable impact on the public accounting of income and expenses, pushing it upwards.

The public deficit skyrocketed in 2020 due to the sharp increase in spending to deal with the health crisis, which added to the less intense drop in revenue caused by the stoppage of activity. The red numbers reached 11% of GDP, one of the worst marks in the democratic history of Spain and the entire EU. The drop the following year was just as sudden as the rise: in 2021, the public administrations achieved the largest deficit reduction in history, of 3.3 points of GDP, until it reached 6.76%, below the promised target with Brussels (8.4%).

The information published this Friday does not include the accounts of local corporations, which however have a reduced impact on the whole. The central Administration monopolizes almost the entire hole, with a lag of 1.8% in its accounts; the autonomous communities also register red numbers, of 0.55%, compared to the reference objective of 1% of GDP that they have set for this year. The Social Security Funds, on the other hand, present a surplus of 0.44%, an already habitual mark in recent months, behind which are the transfers received from the State, which has begun to take charge of the so-called improper expenses of this public sector.

tax revenue

The central administration registered a deficit of 24,322 million at the end of November, 65.9% less than in 2021. This result was possible thanks to the increase in revenue, from 23.7% to 237,652 million, “mainly due to to the growth of taxes by 19.4%, 31,514 million more”, details the note published by the General Invervención of the State Administration. Tax revenue reached all-time highs in November (239,789 million euros), when they almost reached the amount budgeted for the entire year. The ingredients that are behind the rise in collection are the stamina of employment, salary increases, particularly civil servants and pensions —which raise income from personal income tax and contributions—, inflation and better results in corporate tax.

Another reason that explains the improvement in the income of the central Administration is the transfers between administrations, in particular the effect in favor of the State that the definitive liquidation of the resources of the financing system of communities and town halls has had in 2020. State spending, on the other hand, grew by 0.7%, up to 264,340 million, despite the successive aid packages to mitigate the impact of inflation. The report indicates that there have been falls in investment, transfers between administrations and capital, there has been an increase in items such as interest expense, subsidies or social benefits in cash.

The communities, for their part, have registered a deficit of 7,304 million, compared to the surplus of 8,263 million accumulated in the first 11 months of 2021 thanks to the generous extraordinary transfers received by the State to deal with the covid blows. These fell 41.3%. On the contrary, spending rose 7.5%, due to the aforementioned liquidations of the 2020 financing system. Asturias, the Balearic Islands, the Canary Islands, Navarra, La Rioja and the Basque Country, however, remain in positive territory.

The Social Security Funds did register a surplus in both years: 5,794 million up to November 2022, thanks to an increase in income greater than that of expenses, and 1,162 million in the same period of 2021. The Social Security System monopolized almost all of the surplus, 4,074 million, compared to 2,147 million last year. “This difference is mainly due to the increase in social contributions by 4.4%, 5,421 million more, up to 128,496 million, and to the greater transfers received from the State, with an increase of 0.9%,” says the ministry. . The State Public Employment Service (SEPE) has also experienced a surplus, compared to the deficit of 2021, in this case due to reducing spending linked to ERTE and other covid measures.

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