Wednesday, February 21

The Government hopes to meet the 5% deficit target despite the impact of the shock plan against inflation

The Government hopes that the measures of the shock plan against inflation caused by the war in Ukraine do not mean breaking with its line of decline in the public deficit. Though cautiously. This has been assured by the Minister of Finance, María Jesús Montero. “Today, with all prudence, the Government would be in a position to meet the 5% deficit target,” said the head of public accounts in the presentation of last year’s budget execution data.

Montero has claimed the health of the State finances after closing 2021 with a deficit of 6.76%, compared to 10.08% in 2020, strongly impacted by the effect of the pandemic. This figure also means that the State was significantly below the forecast it had in the budget plan presented in the autumn, which foreshadowed a gap of 8.4% for the end of the year. This was the commitment that he had with Brussels for the end of the year 2021.

The Government estimates that the deficit is around 19,500 million less than expected. “It allows us to face the challenges derived from the response to the impact of the war in Ukraine”, Montero defended in his presentation. The Executive has presented this week a response package to the economic situation opened up by the crisis in Eastern Europe estimated at around 6,000 million euros. The other 10,000 million are public guarantees through the ICO for loans to the affected companies.

Despite this increase in spending, the Executive aspires “to this day” to meet the objective of reducing the public deficit, which for this year is set at 5%. Likewise, the Government has to present a new plan to Europe during the month of April, in which it will specifically establish how the Treasury expects that inflation and the economic situation will impact public accounts.

The Ministry of Finance has defended that the extension of the tax reductions in the electricity rate will mean a drop in income of 1,797 million euros during the second quarter of the year. If added to the impact that these measures have had since they were launched last year, they would amount to around 7,000 million euros. It would amount to 12,000 million if they had to be extended until the end of the year. In any case, Montero defends that they are estimates that depend on the evolution of prices. “A lesser impact will mean that the measures to reduce the cost of electricity are working”, he pointed out.