Two years after the start of the pandemic, almost three months after Russia decided to attack Ukraine and a year after the beginning of an inflationary spiral that has taken the evolution of prices to figures not seen in 40 years, the Government continues without defining a fiscal strategy that indicates to investors and economic agents what it is going to do to return the public accounts to a balanced situation and to lower the debt from its historically high levels.
The Tax Authority has placed special emphasis on this circumstance in its evaluation of the update of the Stability Program of the Kingdom of Spain that it presented this Thursday.
“Public finances are in a vulnerable situation and the environment of uncertainty that we live in does nothing but aggravate it,” warned the president of the body in charge of ensuring the stability of public accounts, Cristina Herrero.
What the projections of the Fiscal Authority say is that the maintenance of the strategy of trusting the reduction of the public deficit and the level of indebtedness of the Public Administrations to economic inertia, which in the short term is contributing a phenomenal flow of fiscal income thanks to to inflation, will allow a cosmetic reduction of the deficit and short-term debt -as reflected in the Spanish Stability Program for the period 2022-2025 and as the Government is in charge of underlining-, but it will not solve the underlying problems of public accounts.
Airef considers, in effect, that it is feasible for the public deficit to drop to around 3% of GDP and for the public debt to fall to 109% of GDP by 2025, but it also warns that when this conjunctural impulse ends, the imbalance of the public accounts will stagnate around that 3% -the threshold that today marks the intervention by the Commission of the Spanish accounts- and the debt will rise to a level that could reach up to 140% of GDP in 2030. In other words, that the government’s inaction on the fiscal front will accompany an apparent reduction in the imbalances in the public accounts, but it will not solve a single one of its problems.
Quite the contrary, under this reduction in the nominal deficit of public accounts, the reality that Airef observes is that the imbalance in public accounts has worsened by six tenths as a result of the pandemic. We are talking about 8,000 million euros.
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