Fiscal Consolidation: A Demanding Challenge

Summary

Predictably, Spain closed 2019 with a public deficit that was closer to 2.5% of GDP than to 2%, meaning little change in comparison with 2018. This almost complete lack of improvement means that fiscal consolidation efforts will be carried over to this year.

Key points

• Key points:
• In accordance with the stability goals approved in 2017, the Spanish public administrations must correct the deficit by almost two percentage points, up to 0.5% of GDP in 2020.
• However, achieving this goal would require the implementation of a contractionary fiscal policy, which could be detrimental to the recovery of activity.
• This is because the slowdown in the Spanish economy will mean that the improvement in public accounts that is brought on by the cycle will gradually taper off.

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