AIReF warns that the deficit can only be reduced to 3% if the social shield is withdrawn

In a scenario in which, in all probability, there will be a new extension of the General State Budgets (PGE) next year, the fifth extension in a decade, Spain will only be able to reduce the deficit to the 3% that the framework will require. European prosecutor if he completely withdraws extraordinary measures that were approved to address the energy and price crisis (which are equivalent to around 1.1 points of GDP) and if this withdrawal is also accompanied by a containment of spending by the territorial administrations.

The warning was made this Thursday by the president of AIReF, Cristina Herrero, who has asked the regional governments to prepare more restrictive budgets, remembering that the territories would reach the budget balance (0% deficit) next year. requires them with the current framework increasing spending by around 10%which would not make sense in the middle of the consolidation process that the country must undertake to adhere to the recovery of fiscal rules starting in January.

Cristina Herrero recalled that the forecast is that the anti-crisis measures (reductions in taxes on electricity and gas, the fuel bonus or the reduction in VAT on food) will be withdrawn at the end of this year, as they are. recommending to Spain and its partners the European Commission and other international organizations. However, she has specified that if they had to be extended “now the maximum possible focus is required.”

AIReF asks the autonomies for “responsibility” with spending

The supervisory body recommends that the Ministry of Finance and Public Function convene as soon as possible a Fiscal and Financial Policy Council or, failing that, that it communicate to the autonomies the limit of increase in spending to which they should adjust in their accounts for the year in question. comes to avoid future deviations. For the territories, AIReF calls for “responsibility” and that they adapt the increase in their disbursements to the reference rate set by Brussels for the country as a whole. This rate stands at 2.6% of net primary spending, which is what does not take into account issues such as interest or unemployment funds. This, despite the fact that the evolution of the income of the financing systems would allow a greater increase in spending, thanks to the historical tax collection of recent years.

During his speech at a colloquium organized by Nueva Economía Fórum, Herrero considered that the review of the GDP data that the National Institute of Statistics (INE) has carried out for the period 2020-2022 “makes certain differences that do not fit in better. “we knew how to explain” about how the economy, the job market and tax collection have evolved, which is why it helps “fit the pieces together better.”

The economy slows down more intensely than expected

AIReF also confirms that the latest indicators and data available point to a slowdown in growth in the second part of the year that is being accompanied by a loss of dynamism of the labor market. These are elements that were already anticipated before the summer and to which the rise in oil prices has been added. “The economic slowdown that we anticipated before the summer is going to occur with more intensity and with greater anticipation,” he assured. This rise in energy prices has added to the current complicated context.

In its latest forecasts, the supervisory authority anticipated GDP growth of 2.3% this year and 1.9% for the next. Among the factors that are negatively impacting the economy in this second part of the year, Crsitina Herrero has specifically pointed out the persistence of underlying inflationthe sharp increase in gas and oil prices, as well as the deterioration of international trade, the weakness of China or the transfer of the tightening of monetary conditions (with the increase in rates by the European Central Bank) to the economy real.

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