Marrakech (Morocco), Oct 11 (EFE).- The International Monetary Fund (IMF) has improved this Wednesday its deficit forecasts for Spain to 3.9% this year, six tenths below what this organization calculated in the month of April, thanks to the boost in collection.
The assistant to the director of the IMF Fiscal Affairs Department, Era Dabla Norris, explained in an interview with EFE that the reduction of the Spanish deficit in 2023 reflects “the impact of inflation on tax revenues and the withdrawal of support measures by the pandemic.”
According to the fiscal surveillance report published this Wednesday by the international organization, the deficit prospects for Spain will also improve in 2024 – 3% of GDP, five tenths less – and in 2025 – 3.4%, four tenths less -.
The IMF also eases the debt outlook for this year, which will stand at 107.3% of GDP, 4.3 points less than in 2022 and 3.2 points less than in its April estimates, and then drop to 104%. .7% of GDP in 2024 and 103.9% of GDP in 2025.
Although the Spanish economy is “sensitive” to the rise in interest rates, Dabla Norris points out that the long maturity periods will mitigate the effect of possible rate increases and, in addition, the recovery funds will allow access to financing at low costs.
In any case, he argues that fiscal consolidation should begin by progressively eliminating anti-inflation measures and will require “additional measures” to address pressures on the pension system.
The extraordinary taxes on energy companies, banks and large fortunes will contribute between 3,500 and 3,600 million euros, which represents “an important contribution” to efforts to confront the consequences of the pandemic and the energy crisis.
However, the economist clarifies, “these measures should be temporary and not considered substitutes for the necessary fiscal reform that the authorities intended to implement” with the Recovery Plan.
If maintained over time, he adds, these taxes could have “adverse economic effects” on investment in the energy sector and assures that to put the debt on a downward path it would be necessary to broaden the VAT tax bases and reinforce environmental taxes.
Dabla Norris defends that the proposed reform of European fiscal rules is “a clear improvement” with respect to the current ones, since he believes that they will help better control the deficit and debt.
However, it points out that excluding investments in the energy transition from the spending rule could lead to the financing of this type of measures being excessively dependent on spending, which would lead to a deterioration in fiscal positions.
Marrakech (Morocco), Oct 11 (EFE).- The International Monetary Fund (IMF) has warned this Wednesday that global public debt will grow again this year, mainly due to pressure from the United States (USA) and China, a trend that will continue in the medium term with an annual increase of one point in world GDP.
Along with this pressure from large economies, the increase in debt is also related to slowing growth, rising interest rates and growing fiscal deficits, according to the fiscal surveillance report presented by the IMF this Wednesday.
The organization expects that the US will close 2023 with a deficit of 8.2% of GDP, almost two points more than it calculated in April, and that it will then experience a small correction to place its gap at 7.4% of GDP. GDP in both 2024 and 2025.
This will translate into a higher debt ratio, which will climb to 123.3% of GDP this year, more than one point above the April estimate, and then continue to increase until reaching 137.5% of GDP in 2028.
As for China, its deficit will be slightly corrected this year – when it will close at 7.1% of GDP, four tenths less than in 2022 – and in 2024 (7%) and then grow again in 2025, when it will reach 7.3%.
With this imbalance, its debt will rise this year to 83% of GDP, six points more than in 2022, and will continue to grow until it exceeds 100% of GDP in 2027.
In the prologue to the report, the director of the IMF’s Fiscal Affairs Department, Vitor Gaspar, recognizes the difficulty that countries face in balancing public accounts, due to the combination of high debts, higher interest rates, greater expectations about what the State must do and an “aversion” to taxes, which leads to political red lines.
This has led to situations ranging from the inability to pay bills in some countries to an unsustainable path of spending due to maintaining current policies, as occurs in “large and rich” countries.
In any case, most countries need to implement more restrictive budget policies both to help central banks in their fight against inflation and to rebuild fiscal margins and avoid risks.
The assistant to the director of the IMF Fiscal Affairs Department, Era Dabla Norris, adds in an interview with EFE that the magnitude of the consolidation “will depend on the fiscal space available” in each country.
“Support measures have helped households and businesses cope with rising energy and food prices, but they should be gradually withdrawn” as inflation moderates, he argues.
Despite this, targeted transfers could be made to protect vulnerable households from rising energy prices.
In the case of China, Vitor Gaspar, in a meeting with the press this Wednesday in Marrakech to present the fiscal surveillance report, clarified that he “would not emphasize public debt, the biggest challenge is growth, stability and innovation”.
The director of the IMF’s Fiscal Affairs Department believes that China should change its development model, from an economy based on exports towards domestic demand and investment in infrastructure and real estate innovation, among others.