Spain sent yesterday its Budget Plan for 2021 to the European Commission together with revenue forecasts, the new macroeconomic framework, the deficit reference rates after having suspended the fiscal regulations and the expenditure ceiling. The draft also includes the basic guidelines of the Recovery, Transformation and Resilience Plan which contemplates an investment of 72 billion euros between 2021 and 2023.
The Budget Plan for 2021 contemplates revenues of 40.3% of GDP versus 41.7% in 2020. The government estimates an increase in absolute terms of 33.44 billion euros (+7.3% per year), although the ratio falls due to the greater increase in GDP. In the case of public revenues, the rise is explained by the increase in activity and by fiscal measures. The Google and Tobin Taxes are foreseen, as well as taxes on single-use plastic containers or the hike in VAT on sugared and sweetened beverages from 10% to 21%. Plus measures against tax fraud. Overall, Spain plans to raise taxes for an amount of 6.84 billion euros.
The proposal is based on a non-financial spending limit, known as the ‘spending ceiling’, of 196.09 billion euros, 53.7% higher than that approved in February. This includes extraordinary transfers to the Autonomous Regions (13.48 billion euros), Social Security (18.39 billion euros) and part of the European funds (27.436 billion euros).
It also includes the Government’s new macroeconomic framework which forecasts a fall in GDP of 11.2% this year, with an unemployment rate of 17.1% and growth of 7.2% in 2021. This figure could reach 9.8% if European funds are taken into account, while unemployment could drop to 16.9%.
As for the public deficit, the draft Budget estimates this will climb to 11.3% of GDP this year as a result of the crisis and greater spending to alleviate the consequences. The deficit reference rate is fixed at 7.7% in 2021, while public debt is expected to rise to 118% of GDP this year.