According to data released yesterday by the Bank of Spain, overall government debt reached 1.224, 243 trillion euros in March. It increased by 22.473 billion euros (+1.9%) from February due to the Covid-19 crisis. So public debt is now at an all-time high and equivalent to 98.3% of 2019 GDP.
All organisations highlight in their forecasts that public debt will rise above 100% and set new historical records.
According to the Bank of Spain’s estimates, in a more moderate scenario of a drop in GDP due to the Covid-19 crisis, the public debt ratio will rise to around 115% of GDP. But in the most adverse scenario it could exceed 120% of GDP. Public debt stood at 1.18 trillion euros at end-2019, representing 95.5% of GDP, below the government’s target of 95.9%. For this year, the government set a goal of reducing public debt to 94.65% of GDP. However this has been frustrated by the coronavirus pandemic.
For its part, the International Monetary Fund (IMF) flags in its estimates that public debt will reach 113% (of GDP). That said, this is far off the 155% level Italy will see, according to the international institution’s forecasts.
And so public debt is going to become a real headache for the Spanish economy over the coming years. According to Link Securities:
“Spain is facing the economic crisis sparked by the health crisis with its debt levels at all-time highs. Whatever way you look at it, this takes away a lot of room for manoeuvre in terms of the implementation of the fiscal policies which are aimed at tackling it.
By categories, the State’s debt increased in March by 25.201 billion euros in comparison with February, reaching 1,089.061 trillion euros, which is also a historic high. The autonomous regions’ debt decreased by 257 million euros in March to 297.852 billion, while that of local authorities fell by 332 million euros to 22.973 billion. Social security debt remained practically unchanged at 55.025 billion euros.