The deficit of the autonomies will be greater than expected, putting the path committed to Brussels at risk

The deficit of the autonomous communities will close this year at 0.8% of the Gross Domestic Product (GDP), above the Government’s forecasts, which in the Budget Plan sent to Brussels placed it at 0.6% of the GDP, according to the estimates of the Foundation for Applied Economic Studies (Fedea).

This deviation is explained because Fedea expects that autonomous spending will rise to a greater extent than expected by the central government and by AIReF (which also foresees an aggregate deficit of the communities of 0.6% of GDP). This is stated by Fedea in its Fiscal and Financial Observatory of the Autonomous Communities, in which regional income and expenses are analyzed until July and an estimate of the regional budget balance at the end of the year is presented.

Fedea recalls that the Government and AIReF have revised upwards their deficit forecasts for the communities in October, since previously the Executive calculated a negative gap of 0.3% of GDP. And this review responds to a greater than expected increase in expenses, especially expenditure on interest and intermediate consumption, and a lower than expected collection through the Tax on Property Transfers and Documented Legal Acts (ITP and AJD) due to the slowdown in the real-estate market. “This deviation is produced by the strong growth in spending, particularly public consumption and, therefore, we think that there will be a structural deterioration,” Fedea warns.

The Fedea study, carried out by José Ignacio Conde-Ruiz, Manuel Díaz and Carmen Marín, concludes that if this deficit forecast of 0.8% of GDP is confirmed, “the path of deficit reduction” announced by the Central government for 2023, which rests on reducing the deficit of the autonomous communities. Fedea emphasizes that, with the more than likely return of European fiscal rules in 2024, the fiscal consolidation of all public administrations “cannot be delayed” and should be “one of the main tasks of the future Government of Spain.”

Seven communities below

When breaking down the data by Autonomous Communities, the worst stop is the Valencian Community with -2.3% of GDP. Followed by Murcia, which is also left with a forecast that drops to -2.2%. Castilla-La Mancha and Catalonia are positioned with a projection of -1.2%, followed by Aragón and Extremadura with -0.9% and La Rioja with -0.8%, which is equal to the total -0.8% of the CCAA.

On the opposite side are the 10 remaining communities, with the Community of Madrid, Castilla y León and Andalusia, with the lowest projection, -0.6%. For their part, the Basque Country, Galicia, Cantabria and the Canary Islands are between -0.3% and -0.2% deficit.

The only three whose projection is positive are the Balearic Islands and Asturias, with 0.2% and finally Navarra with 1.2%.

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