Spain

Deficit and Unemployment down as GDP grows


Published

Latest figures from the Spanish government show that the country’s deficit has fallen by more than 19% in the first half of 2014. Minister of Economy Luis de Guindos also told Parliament that Spain’s GDP will grow by 1.5% in 2014 with growth rising to 2% in 2015.

Unemployment is expected to fall to 24.9% in 2014 and 23.3% in 2015.

Euronews reports the Minister as saying “We have a economy that has been brought back to health, productive and competitive, that stopped being a drag on the Eurozone and is contributing, and making a difference, to its growth”.

The official statement on the deficit as published on the Government website La Moncloa is as follows:

“Spanish State deficit down more than 19% in first half of 2014

Tuesday 29 July 2014

The State deficit stood at 26.19 billion euros in the first six months of the year – equivalent to 2.52% of GDP, which is a reduction of 19.1% on the same period of 2013.

In turn, the combined deficit of the Central Government, the regional governments and the Social Security system to the end of May, standing at 24.42 billion euros, represents a reduction of almost 4% on the same period in 2013. This reduction would stand at 11% when including the financial aid accounted for in the deficit at May 2013.

State deficit to June

In the first six months of the year, the State posted a deficit of 2.52% of GDP, 19.1% lower than in 2013.

Excluding financial spending, which rose by 5.8% to June, the primary deficit posted in the first six months of the year stands at 11.47 billion euros – 38% lower than in the same period last year.

Non-financial resources

Non-financial State resources amounted to 59.71 billion euros. This is an increase of 6.9% on the first six-month period in 2013. This result is mainly due to revenue trends from taxes, which show an increase of 7% in the State.

Taxes on income and wealth, which include revenue from Personal Income Tax and Corporate Income Tax, rose by 7.8%.

Taxes on production and imports, which include VAT and the special taxes, rose by 16.1%. Of this increase, 1.2 billion euros came from the new tax categories created by Law 15/2012, of 27 December 2012, on tax measures for energy sustainability, while only 542 million euros were recorded under this heading at the close of May last year.

All other non-financial resources grew by 9.1% in the first half of the year.

Expenses

Non-financial expenses fell by 2.7% on June 2013 to stand at 85.9 billion euros. When discounting the expense derived from financing the electricity deficit, which amounts to 1 billion euros in 2014 and has no corresponding amount in 2013, non-financial expenses fell by 3.8%.

Under the heading of revenue expenditure, it is worth highlighting the 20.9% drop in spending on intermediate consumption when compared with 2013 due to the fall in accrued expenditure on military armaments, as well as the 0.2% drop in remuneration paid to employees. A 23.7% reduction was also seen in social transfers in kind to market producers as well as a 10.2% reduction in current transfers between public administration services, mainly due to the fall in transfers to the Social Security system, which fell by 17% to June. In turn, under capital expenses, gross fixed capital formation fell by 5.3% when compared with the first half of 2013.

These spending reductions offset the increase posted under other headings, such as interest payments, which rose by 5.8%; spending on ongoing international cooperation, which rise by 63.4%; social benefits aimed at social transfers in kind, which rise by 3.7% as a result of the increase in civil service pensions; other current transfers increased by 3.5% due to the larger transfers made to the foreign trade sector and the contribution to the budget from the EU under the GNI-based resource.

Under the heading of capital expenses, transfers to other public administration services rose by 21.5%, while aid to investment and other capital transfers rose by 25.6% when compared with the first six months of 2013.

Combined deficit of all public authorities to May

Also released today is the figure on the consolidated deficit in national accounting terms of the Central Government, the regional governments and the Social Security system to the end of May, which stands at 24.42 billion euros, representing a decrease of 4% when compared with the same period of 2013. This reduction would stand at 11% if the financial aid accounted for in the deficit at May 2013 were to be included.

Central Government

The Central Government posted a deficit of 23.63 billion euros to May, 4.7% less than in the same period of 2013.

This deficit equates to 2.27% of GDP. This result is due to both improved figures from the State, the negative balance of which fell by 1.4%, and the surplus from the central government agencies, which stands at 0.2% of GDP.

Social Security authorities

In the first five months of the year, the Social Security authorities posted a surplus of 5.44 billion euros. This is 48.3% higher than the figure posted in the same period last year. This deficit equates to 0.52% of GDP, with an improvement of 0.16 percentage points on May 2013. This surplus is mainly due to the results posted by the State Public Employment Service, which shows a surplus equal to 0.18% of GDP – four times the surplus posted to May last year.

Regional Governments

The regional governments posted a deficit in national accounting terms of 6.22 billion euros, 0.6% of GDP.

This result stems from non-financial expenditure increasing by 1.7%, with 12.2% growth in interest payments, and resources falling by 1.7% on the period January-May 2013. Nonetheless, any comparison with 2013 is distorted by the lower advance payments being transferred to the regional governments this year: 1.99 billion euros to May 2014, compared with 2.04 billion euros in the same period last year.”

More detailed briefing on the politics and risk of doing business in this country is available to clients and subscribers. If you would like to know more then please contact enquiries@tradebridgeconsultants.com