The government is taking advantage of the historic wave of tax revenues to reduce the public debt to 113.1%

“This is the largest reduction in public administration indebtedness recorded in modern history.” The government did not even wait for the Bank of Spain to officially publish year-end data on public debt to show off the strong decline the index has seen over the past year, as It increased from 118.3% at the end of 2021 to 113.1%.

Senior Vice President Nadia Calvino, in a statement on Friday, attributed the cut to “the strong growth of the economy and a responsible fiscal policy,” fueled in this case by the unprecedented financial income that, according to the IRS, between January and November contributed 33,000 million. Euros more than the record year 2021 and despite the application of financial relief measures of about 7000 million.

Public debt shook by 2.5 points in just one month – at the end of November it was at 115.5% – which may have something to do with the upward revision of the GDP data by the National Institute of Statistics, which would have logically. Subtract a few tenths of a point from the debt-to-GDP ratio.

Data published by the Bank of Spain indicates this The general public debt ended up above 1.5 trillion euros, precisely at 1,503 trillion, which is practically the same number as in November (1,505 trillion), when the debt ratio reported by the institution was 115.53%. Without the relevant changes in terms of the size of the public debt, this two-point reduction seems to find its explanation in the upward revisions to GDP for 2022 by the National Institute of Statistics that raised the growth rate last year to 5.5%.

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For the Ministry of Economic Affairs, the most relevant thing is that the public debt-to-GDP ratio has finally fallen by 2.1 points below the 115.2% that was projected in the budget plan, and this brings the government close to complying with the target of 112.4 percentage that was set for the full year. 2023 in the total table of the state’s general budget for the year 2023.

He sees that too As a sign of financial rigor Which will be used by the executive branch, which, in his opinion, will significantly reduce the deficit and public debt in accordance with “the measures adopted to reduce inflation and compensate families and economic sectors most affected” by spiral inflation. “This reduction confirms the government’s commitment to fiscal sustainability and the efficient use of public resources,” said Nadia Calvino, the first deputy head of the government, in a statement circulated even before the final year-end data on public debt.

Doubts about reducing public debt

Not many analysts, international organizations or the main institution responsible for ensuring the sustainability of Spanish public accounts, the Independent Authority for Fiscal Responsibility (Airef), share the VP’s vision.

Airef, which predicted in November that the public debt would end at 113.9% of GDP but without relying on a last-minute revision of GDP from the National Institute of Statistics, has already shared its concerns that the trend of reducing public debt will decline from 2023 due to a loss of momentum. The post-pandemic economic recovery – which has seen Spain grow by 5.5% in the past two years – and the additional tax revenue generated by that recovery and inflation. Your base scenario is that Public debt reaches strength in 2025 at around 110% The International Monetary Fund is also involved.

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