Thursday, August 18

Spain, the rich country that least reduced the deficit after Covid-19, according to the IMF


The IMF confirms the inexistence of a fiscal adjustment plan in the medium term

Pedro S
Pedro Sánchez talks with Nadia Calvio during the government control session.Chema MoyaEFE

Despite having prepared its economic forecasts before the Budgets were announced – and even the Government announced measures such as the donation of 400 euros to young people for “cultural activities” – data from the International Monetary Fund (IMF) confirm that Spain does not have a fiscal adjustment plan. This is made clear by the economic forecasts of the institution, published this week.

Thus, the IMF puts in black on white that the reduction of Spain’s deficit and debt is something merely cyclical. Beyond 2023, when the post-Covid-19 ‘rebound’ concludes, Spain will permanently maintain more deficit than before the pandemic. In fact, between 2023 and 2026 that imbalance remain stable in the range of 4.2% -4.4% of GDP. When Pedro Sánchez arrived at Moncloa, in 2018, the deficit was 2.5%.

It is true that, as the IMF declares in its report ‘Fiscal Monitor’, published yesterday, in most countries fiscal policies continue to be expansive. But it is also true that in many of them the deficit is going to fall much faster than in Spain. The institution foresees that, in the developed world, the ‘red numbers’ of the States will return in 2026 to the level they had before the pandemic. In Spain, in that year, the deficit will be 1.4 points higher. It is not just falling behind partners and competitors; It is also losing by a landslide, since no other country will see its ‘red numbers’ grow so much.

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The only consolation is that the public debt will grow relatively little, at a rate of half a percentage point of GDP. But this is due to a factor over which Spain has no capacity to influence: inflation in the euro area. If prices accelerate and the European Central Bank (ECB) decides to raise interest rates faster than the IMF and the market anticipate, the cost of Spanish debt will rise dramatically, and with it, the size of the debt. that liability.

It is an impossible scenario, but not improbable. In the United States, the IMF, the Federal Reserve, and the Joe Biden government appear to have been wrong in predicting that the price spike was going to be a very brief phenomenon. Inflation in the US is growing at 5.4% per year, and the Federal Reserve is going to have to abandon its debt-buying policy much faster than it had anticipated to try to prevent prices from spiraling out of control.

The IMF data also reflect the continued fracture of the eurozone in the two groups that have been marking economic tensions in Europe since the euro crisis broke out: the north, characterized by extreme austerity, and the south, which stands out for its deficits. Thus, the Netherlands, Austria, and Germany manage to reduce their public debt – already reduced – in the coming years, while Belgium, Spain, and France do not. The hyper-indebted Italy and Greece cut their debt, although in their case it is a question of making a virtue of necessity. This situation confirms the “lame” recovery referred to by the Fund’s chief economist, Gita Gopinath, on Tuesday, when she explained that the world economy is going to emerge from the Covid-19 crisis with the same problems that it entered into. she. And, above all, with less fiscal margin.

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