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Spain presents an adjustment plan with a net primary spending growth of 3% over 7 years

by AI | 15.Oct 2024 | Europe in brief AI

The deficit will drop to 0.8% in 2031 and debt will still be 90% by the end of the adjustment plan.

The Minister of Economy, Trade, and Business, Carlos Cuerpo, during a press conference following the meeting of the Council of Ministers, at the Palacio de La Moncloa, on October 15, 2024, in Madrid (Spain). Photo: Carlos Luján / Europa Press

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Madrid – Spain has committed to the European Union a medium-term structural fiscal adjustment plan, which involves setting the average net primary expenditure growth at 3% over a seven-year horizon, in compliance with the new EU fiscal rules.

“This expense is what we are going to have or what we have as a reference moving forward and what we are going to transparently have to comply with year after year to be in line with the fiscal rules,” explained the Spanish Minister of Economy, Trade, and Business, Carlos Cuerpo, at the press conference following the Council of Ministers.

 Although, by default, adjustment plans are prepared for four years, EU member states can request an extension of the fiscal adjustment period from four to a maximum of seven years if they carry out certain reforms and investments that enhance resilience and growth potential and support fiscal sustainability and address common priorities.

The Spanish Government has opted to extend the adjustment horizon to seven years, with a medium-term plan that is accompanied by a program of reforms and investments, including fiscal measures, ecological transition, digital transformation, and physical and human capital.

The trajectory must ensure that, at the end of the adjustment period, public debt is on a plausible downward path, or remains at prudent levels below 60% of GDP in the medium term, and that deficits do not exceed the 3% of GDP threshold and also maintain that behavior in the medium term.

According to the Government, compliance with the expenditure rule outlined in its adjustment plan ensures the continuity of the fiscal responsibility strategy. The Government’s forecasts place the public deficit on a downward path, from 3% of GDP in 2024, to 2.5% in 2025, and to 2.1% in 2026. According to longer-term projections, the deficit will be at 0.8% of GDP in 2031.

Regarding the debt, the Government expects the ratio to GDP to fall from 102.5% in 2024, to 98.4% in 2027, to 90.6% in 2031, and to 76.8% in 2041. Although a downward path is noted over the coming years, the Executive’s projections do not specify when Spain will manage to reduce its debt below the “prudent” levels of 60% proposed by Brussels. (October 15)

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