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The Government presents the objectives of budget stability for the next three years
The Council of Ministers has received from the Second Vice-President and Minister of Economics and Finance "Report on the cyclical position of the Spanish economy, which has been referred to the Autonomous Communities. The outlook for local entities are in a deficit of 0.6 per 100 in 2010, 0.8 per 100 in 2011, 0.3 per 100 in 2012 and 0.2 per 100 in 2013.
The General Law of Budgetary Stability requires that this report be taken into account in setting the objectives of government stability of the three following years.
Report cyclical position
Estimates of the Ministry of Finance based on a projected decline in GDP of 0.3 per 100 in 2010 and growth rates of 1.3 per 100 in 2011, 2.5 per 100 in 2012 and 2.7 per 100 in 2013. These projections are an update of the macroeconomic framework presented in the Stability Programme in January.
These new estimates for the next three years are lower than those estimated by the Government at the beginning of the year, five tenths in 2011, and four tenths in 2012 and 2013.The revision of these forecasts in 2010 also includes improvements in private consumption, equipment investment, exports and imports, and projected to fall in construction and employment. The plan of government spending cuts recently approved by the Government implies a downward revision of consumption and public investment and current transfers both in 2010 and, above all, in 2011.
However, considerable turbulence in financial markets and the climate of uncertainty suggests that the best contribution that fiscal policy can make to the economy now lies in accelerating the process of fiscal consolidation, including the implementation of measures long range to ensure the sustainability of public finances.
Regarding the components of growth, the contribution of domestic demand will improve steadily from -1.4 percentage points in 2010 (nearly five points higher than in 2009) to 2.4 points in 2013.As regards external demand, positive contribution will be gradually reduced from 1.1 percentage points to 0.3 points in 2013.
This behavior contrasts with the negative contribution recorded before the start of the crisis and is due to the rebalancing of growth patterns of the Spanish economy from the construction industry to other less intensive in imported intermediate consumption or, more export propensity. Correcting this imbalance, of paramount importance, it also highlights the need to cut the Spanish of external funding, which will continue to decline and reached 2.5 per 100 of GDP in 2013.
Especially striking is the strength shown by exports of goods and services, from mid-2009 have reflected a good performance, taking advantage of the strong recovery of world trade, the gains in competitiveness associated with the inflation differential in favor of Spain in recent quarters and the depreciation of the euro.
In particular, in the first quarter of 2010 exports of goods rose 13 per 100 by volume by the National Accounts and in April export orders re-registered significant progress following the tone of the last three months. Thus, exports are expected to achieve growth of around 7 per 100 in the whole of 2010. Improving competitiveness will contribute positively to growth in exports throughout the period of estimation.
Budgetary stability objective
The Council of Ministers has also received a report of the Second Vice-President and Minister of Finance on budgetary stability objective for the triennium 2011-2013. The proposal will be presented to the Autonomous Communities within the framework of a Council of Fiscal and Financial Policy and local entities in the National Commission of Local Government.
During 2008 and 2009 fiscal policy has played a key role in cushioning the impact of economic recession and shore up confidence of the agents, allowing full operation of automatic stabilizers and discretionary measures taken in line with the recommendations of the European Commission other international organizations. This has conditioned a greater imbalance of public accounts, the increase of the need for joint funding of the Public Administrations to 11.2 per 100 of GDP in 2009, when only two years before the budget was closed with the third consecutive surplus.
The Second Report of the Vice President raises a progressive reduction of general government deficit over the next three years until 2013 to comply with the commitments to the European Commission under the Stability and Growth Pact, not to exceed the limit 3 per 100 of deficit.Thus in 2010 it is estimated that the deficit of all the government will be 9.3 per 100, will drop to 6 per 100 in 2011 to 4.4 per 100 in 2012 and to 3 100 in 2013.
As regards the Central Administration, the 2010 deficit is projected at 5.9 per 100, which will decrease to 2.3 per 100 in 2011, will expand to 3.2 per 100 in 2012 and cut to 2.1 per 100 in 2013. Forecast for the autonomous communities are a deficit to 3.1 per 100 in 2010, 3.3 per 100 in 2011, 1.3 per 100 in 2012 and 1.1 per 100 in 2013. As for local entities, with an estimated deficit of 0.6 per 100 in 2010, 0.8 per 100 in 2011, 0.3 per 100 in 2012 and 0.2 per 100 in 2013.With respect to Social Security, the estimate is a surplus of 0.2 per 100 of GDP in 2010 and 0.4 per 100 in the remaining three years of scenario forecasting. The deficit in the years 2010 and 2011 reflect the amount of negative assessments of Territorial Administration in 2008 and 2009.
Limit non-financial expenditure of the State
Finally, the Council of Ministers has received another report of the Second Vice-President of the Government also reported on the limit of non-financial expenditure of the State Budget for 2011.Since the estimated income for next year in terms of national accounts are of 104.539 million euros, the objective for the State is a deficit of 2.3 per 100 (24.331 million euros) and that adjustments to National Accounts amounted to 21.186 million euros, the spending limit in terms of National Accounts 150 056 000 shall be in euros.
But this limit of non-financial expenditure can not be compared directly with the established in 2010, since the new system of financing of the Autonomous Communities is a decrease of the expenditure budget due to lower amount of Sufficiency Fund. It is therefore necessary to eliminate the expenditure under the funding schemes of the Autonomous Communities and Local Government so that comparison is homogeneous. After these adjustments, the non-financial expenditure limit for 2011 is set at 122.256 million euros, representing a decrease of 7.7 per 100 compared to the budget of 2010 in comparable terms.
Report cyclical position
Estimates of the Ministry of Finance based on a projected decline in GDP of 0.3 per 100 in 2010 and growth rates of 1.3 per 100 in 2011, 2.5 per 100 in 2012 and 2.7 per 100 in 2013. These projections are an update of the macroeconomic framework presented in the Stability Programme in January.
These new estimates for the next three years are lower than those estimated by the Government at the beginning of the year, five tenths in 2011, and four tenths in 2012 and 2013.The revision of these forecasts in 2010 also includes improvements in private consumption, equipment investment, exports and imports, and projected to fall in construction and employment. The plan of government spending cuts recently approved by the Government implies a downward revision of consumption and public investment and current transfers both in 2010 and, above all, in 2011.
However, considerable turbulence in financial markets and the climate of uncertainty suggests that the best contribution that fiscal policy can make to the economy now lies in accelerating the process of fiscal consolidation, including the implementation of measures long range to ensure the sustainability of public finances.
Regarding the components of growth, the contribution of domestic demand will improve steadily from -1.4 percentage points in 2010 (nearly five points higher than in 2009) to 2.4 points in 2013.As regards external demand, positive contribution will be gradually reduced from 1.1 percentage points to 0.3 points in 2013.
This behavior contrasts with the negative contribution recorded before the start of the crisis and is due to the rebalancing of growth patterns of the Spanish economy from the construction industry to other less intensive in imported intermediate consumption or, more export propensity. Correcting this imbalance, of paramount importance, it also highlights the need to cut the Spanish of external funding, which will continue to decline and reached 2.5 per 100 of GDP in 2013.
Especially striking is the strength shown by exports of goods and services, from mid-2009 have reflected a good performance, taking advantage of the strong recovery of world trade, the gains in competitiveness associated with the inflation differential in favor of Spain in recent quarters and the depreciation of the euro.
In particular, in the first quarter of 2010 exports of goods rose 13 per 100 by volume by the National Accounts and in April export orders re-registered significant progress following the tone of the last three months. Thus, exports are expected to achieve growth of around 7 per 100 in the whole of 2010. Improving competitiveness will contribute positively to growth in exports throughout the period of estimation.
Budgetary stability objective
The Council of Ministers has also received a report of the Second Vice-President and Minister of Finance on budgetary stability objective for the triennium 2011-2013. The proposal will be presented to the Autonomous Communities within the framework of a Council of Fiscal and Financial Policy and local entities in the National Commission of Local Government.
During 2008 and 2009 fiscal policy has played a key role in cushioning the impact of economic recession and shore up confidence of the agents, allowing full operation of automatic stabilizers and discretionary measures taken in line with the recommendations of the European Commission other international organizations. This has conditioned a greater imbalance of public accounts, the increase of the need for joint funding of the Public Administrations to 11.2 per 100 of GDP in 2009, when only two years before the budget was closed with the third consecutive surplus.
The Second Report of the Vice President raises a progressive reduction of general government deficit over the next three years until 2013 to comply with the commitments to the European Commission under the Stability and Growth Pact, not to exceed the limit 3 per 100 of deficit.Thus in 2010 it is estimated that the deficit of all the government will be 9.3 per 100, will drop to 6 per 100 in 2011 to 4.4 per 100 in 2012 and to 3 100 in 2013.
As regards the Central Administration, the 2010 deficit is projected at 5.9 per 100, which will decrease to 2.3 per 100 in 2011, will expand to 3.2 per 100 in 2012 and cut to 2.1 per 100 in 2013. Forecast for the autonomous communities are a deficit to 3.1 per 100 in 2010, 3.3 per 100 in 2011, 1.3 per 100 in 2012 and 1.1 per 100 in 2013. As for local entities, with an estimated deficit of 0.6 per 100 in 2010, 0.8 per 100 in 2011, 0.3 per 100 in 2012 and 0.2 per 100 in 2013.With respect to Social Security, the estimate is a surplus of 0.2 per 100 of GDP in 2010 and 0.4 per 100 in the remaining three years of scenario forecasting. The deficit in the years 2010 and 2011 reflect the amount of negative assessments of Territorial Administration in 2008 and 2009.
Limit non-financial expenditure of the State
Finally, the Council of Ministers has received another report of the Second Vice-President of the Government also reported on the limit of non-financial expenditure of the State Budget for 2011.Since the estimated income for next year in terms of national accounts are of 104.539 million euros, the objective for the State is a deficit of 2.3 per 100 (24.331 million euros) and that adjustments to National Accounts amounted to 21.186 million euros, the spending limit in terms of National Accounts 150 056 000 shall be in euros.
But this limit of non-financial expenditure can not be compared directly with the established in 2010, since the new system of financing of the Autonomous Communities is a decrease of the expenditure budget due to lower amount of Sufficiency Fund. It is therefore necessary to eliminate the expenditure under the funding schemes of the Autonomous Communities and Local Government so that comparison is homogeneous. After these adjustments, the non-financial expenditure limit for 2011 is set at 122.256 million euros, representing a decrease of 7.7 per 100 compared to the budget of 2010 in comparable terms.
