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21-04-2017 12.45

CATALAN ECONOMY

Catalonia reduces its deficit to 0.93%

Catalonia reduced its deficit to 0.93% of GDP in 2016

  • Catalonia reduces its deficit to 0.93% of GDP
  • In the last 6 years, the Generalitat reduced its deficit by around 80%, from a peak of 4.48% in 2010 (€9.1 bn) to the current 0.93% (€1.9 bn)
Deficit Source: Banco de Espaņa and Ministry of the Vice-presidency and of the Economy and Finance
The Government of Catalonia posted a deficit of €1.9 billion in 2016, equivalent to 0.93% of its GDP. According to the data published by Spain's Ministry of Finance and Public Service, the Generalitat has reduced its deficit by €3.91 billion (1.95 GDP points) in one year. In homogenous terms —that is, excluding public-private partnerships (PPP) investments made in previous financial years—, this means a €1.96 billion cut (1.0 GDP points).
 
In the last six years, the Generalitat has managed to reduce its deficit by around 80%, from a peak of 4.48% in 2010 (€9.1 billion) to the current 0.93% (€1.9 billion).

Increase in revenue

The deficit reduction achieved in 2016 can be largely explained by a €2.16 billion increase in nonfinancial revenues, resulting essentially from 2014 settlement proceeds. It should be noted that the financing model of the autonomous communities is based on a system of pre-paid transfers (advances).
 
The Spanish government makes a down payment for the amount it considers to apply according to the forecasted collection for the fiscal year; two years later, when the actual amount collected is known, the Spanish government transfers the difference. The settlement amount for 2014 is very high because the initial forecast by the Spanish government was much lower than the actual collected amount.
 
As far as tax revenues are concerned, worth mentioning is the improved collection of the tax on capital transfers and documented legal acts: it increased by 12.1% thanks to the recovery in the housing market and a 7.3% increase in revenues from the property tax.
 
Accrued expenditures have increased by 1.9% compared to 2015 (€ 449 million), mainly due to higher staffing costs and increased expenses by the Department of Health.


Lower debt-to-GDP ratio
 
Progressive efforts by the Generalitat towards reducing the deficit have allowed a slowdown in the past few years. Thus, the government of Catalonia has managed to decrease its year-on-year growth rate from 38.8% in 2010 to a forecasted 1.6% in 2017, clearly below the projected GDP growth (2.7%). Besides, for the first time in many years, in 2016 the debt-to-GDP ratio was 0.2% lower than it was on the previous fiscal year, decreasing from 35.6% (2015) to 35.4% (2016). In 2017, the forecasted debt-to-GDP ratio is 35.1%.
Images
Debt growth rate

Debt growth rate JPG 20KB

Evolution of debt (% of GDP)

Evolution of debt (% of GDP) JPG 20KB

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