PUBLIC DEFICIT IN THIRD QUARTER STANDS AT 2.59% OF GDP

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The deficit of the public authorities as a whole in the third quarter of the year stood at 2.59% of GDP

The deficit of the public authorities as a whole in the third quarter of the year stood at 2.59% of GDP, in line with the 4.6% budget stability target set for the year.

The Ministry of the Treasury and Public Function published the public deficit figures on its website for the third quarter of 2016, including the figures for local authorities. It also published the State deficit figures for the month of November, as well as the joint deficit of the Central Government, the regional governments and the Social Security system, excluding local authorities, for the month of October, in national accounting terms.

State deficit (November)

The State posted a deficit of 26.41 billion euros up to the month of November, equivalent to 2.36% of GDP. This deficit ratio is 0.01 percentage points lower than that posted in the same period last year, although the figure is 3.7% higher than that posted in the same period of 2015.

This change can be explained by a drop in revenue from taxation in the month of November as a result of the 38.6% increase in rebates requested.

Non-financial State resources

Non-financial State resources amounted to 159.12 billion euros until November, equivalent to 14.24% of GDP, a year-on-year decline of 2.5%.

This decline is mainly due to the fall in revenue from taxation, which fell from 140.55 billion euros in 2015 to 137.6 billion euros in 2016, 2.95 billion less. Most of this fall took place in the month of November for the aforesaid reason of the 38.6% increase in rebates requested, particularly for Corporate Income Tax, which rose by 652 million euros, and lower revenue collected from Value Added Tax (VAT), 991 million euros. Personal Income Tax fell by almost 7% on November 2015, mainly due to the definitive settlement of the financing system for the regional governments for 2014 (settled in July), which meant a decline in the collection of this tax for the State for a sum of 2.13 billion euros.

Other taxes fell by 2.4%, mainly due to lower revenue collected from the levy on continental water use for energy production by 55.4%, since in 2015 this included the self-assessments for 2013 and 2014 and the 20.7% fall in revenue from the Tax on the Value of Electricity Production, which dropped from 1.55 billion euros in November 2015 to 1.23 billion in November 2016.

Income from State-owned properties rose by 18.3%, mainly due to higher dividends from the Bank of Spain and ENAIRE, and due to the interest accrued on loans granted and charged to the funds to finance regional governments and local authorities, which rose by 16.5%.

Non-financial State expenditure

Non-financial State expenditure stood at 185.53 billion euros until the end of November, a fall of 1.7% on 2015, a decline reflected in almost all headings of expenditure.

Current transfers between public authorities, the largest item of expenditure (almost 60% of the total), fell by 1.3% (1.35 billion euros). This was mainly due to fewer transfers made to the State Employment Service to the sum of 5.64 billion euros, down 61.3%, as a result of increased transfers to the regional governments (up 5.5%) and to local authorities (up 3.8%).

Spending on intermediate consumption was 7.1% down on 2015 and 30.4% down for the month. The remuneration of salaried employees fell by 0.1%, with total spending of 15.83 billion euros. Accrued interest fell by 4.5%, as a result of interest rate changes.

Among the headings of current spending that increased, noteworthy is that of social benefits other than social transfers in kind, which rose by 6% year-on-year to a total of 12.75 billion euros, mainly as a result of increased spending on pensions for former public servants, which rose by 3.9%.

Joint deficit of Central Government, regional governments and Social Security system (October)

The joint deficit of the public authorities until October, excluding local authorities, stood at 2.68% of GDP, 15.4% less than in the same period of the previous year (and 13.8% less than that posted in September). If the net balance of assistance for financial institutions is excluded in both periods, which in 2016 stood at 2.25 billion euros and in 2015 at 456 million euros, the deficit in October 2016 would be equivalent to 2.88% of GDP, a 10.2% decline year-on-year. 

Central Government

The Central Government deficit (excluding financial assistance) stood at 1.77% of GDP in October, compared with 1.83% in October 2015.

The positive performance of this sub-sector in October was mainly due to increased revenue from the part payments of Corporate Income Tax approved by Royal Decree-Law 2/2016, and to a lesser extent by the decrease in transfers to the State Public Employment Service (Spanish acronym: SEPE).

If assistance to financial institutions is included, the Central Government deficit would stand at 1.97% of GDP, including the State deficit (1.94% of GDP), as well as the deficit of the Central Government bodies (0.03% of GDP).

Regional governments

The regional governments have reduced their deficit by more than 70% on the same period last year, to stand at 3.73 billion euros, equivalent to 0.33% of GDP, compared with 13.18 billion euros in the same period of 2015.

The regional deficit was favourably affected by the result of the definitive settlement of 2014, with a balance in favour of the regional governments amounting to 7.67 billion euros, compared with the definitive settlement for 2013 which, although also favourable for the regional governments, only amounted to 1.75 billion euros.

Social Security Funds

Social Security Funds posted a deficit of 6.46 billion euros until October, equivalent to 0.58% of GDP, 3.93 billion euros more than in the same period last year.

This is mainly due to a higher deficit of the Social Security system, 18.3% up on 2015, although there was a noteworthy increase in social contributions, up 3.1% (tripling the rate of 1% posted a year ago). Welfare benefits have increased by 3.4%. Most of this spending goes on contributory pensions, with a 1.2% year-on-year rise in the number of beneficiaries and average monthly pensions of 907.8 euros, 1.9% up on 2015, higher than the annual increase in pensions, since in net terms, new pensioners are joining the system with higher pensions. This gives a 27.4% differential between the rate of growth in the main expense of the system and its financing.

Also noteworthy is the lower surplus of the State Public Employment Service, which has dropped to half its level as a result of lower transfers received from the State (5.17 billion euros less than in 2015).

On a positive note, the Wage Guarantee Fund (FOGASA) has reduced its deficit by 58.4%.

Joint deficit of the public authorities (third quarter)

Local authorities posted a surplus of 5.76 billion euros, equivalent to 0.52% of GDP, a 63.5% increase on the third quarter of 2015. The nominal increase amounts to 2.24 billion euros.

This increase is a result of higher revenue, up 2.2%, and a reduction in spending of 2.5%, percentages directly affected by the result of the settlement of the financing system, which has led to a positive balance this year of these authorities in the sum of 923 million euros, while the balance in favour of the State in 2015 amounted to 772 million.

Following the results posted by the local authorities, the public sector deficit in the third quarter stands at 2.59% of GDP, excluding financial assistance, a year-on-year reduction of 10.6%, and a 9% reduction on the deficit posted in the second quarter of 2016. These figures place us in line with the fulfillment of the budget stability target set for 2016 of 4.6% of GDP.

 

 

 

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