Spain on track to cut deficit even in weaker economic scenario, minister says

FILE PHOTO: Pandemic delays completion of Spain's Sagrada Familia beyond 2026
FILE PHOTO: A crane is seen in front of the towers of the landmark of Sagrada Familia basilica in Barcelona Spain, May 17, 2021. REUTERS/Nacho Doce/File Photo

November 8, 2021

MADRID (Reuters) – Spain is well positioned to reduce its deficit and cut debt even amid a souring global economic outlook thanks to prudent budget plans for the coming year, Economy Minister Nadia Calvino told reporters in Brussels on Monday.

Asked whether surging energy prices would force the government to alter its forecast for around 7% growth this year, Calvino said these represented a “temporary phenomenon that should improve over the coming year.”

A sharp rise in public spending during the first year of the COVID-19 pandemic led Spain’s deficit to balloon to nearly 11% of gross domestic product in 2020 and the government expects it to come in at around 8.4% this year.

Under the 2022 budget, Spain plans to spend a record 40 billion euros ($46.22 billion) of state funds on investments, boosting growth and thereby lowering the deficit as a proportion of GDP to 5% in 2022 and 4% in 2023.

European Union fiscal rules that set a deficit ceiling of 3% GDP have been suspended until 2022 but Spain’s government, which wants to reform the rules, has said it will not return to that threshold until 2024 at the earliest.

Despite solid data from the labour market, Spain’s economic recovery appears shakier than previously thought.

Third-quarter economic growth missed expectations after a weak second quarter and inflation is at its highest in three decades, potentially jeopardising the government’s target of returning to pre-pandemic output levels by the end of the year.

($1 = 0.8655 euros)

(Reporting by Nathan Allen, editing by Inti Landauro and Catherine Evans)