IMF says government overspend in Spain will reach record levels in 2020

Spending has shot up this year.
Spending has shot up this year. / SUR
  • A string of economic data and forecasts this week has brought into focus the worrying national outlook because of the Covid-19 pandemic

According to the International Monetary Fund (IMF), Spanish public finances will be some of the worst affected by the shockwaves of the Covid-19 crisis. The forecast, in the World Economic Outlook report released this week, highlights the perilous economic outlook for the country.

In its predictions, the IMF foresees a record deficit reaching 14.1% of the size of the economy (GDP) this year, meaning a 150-billion-euro overspend.

Never before, except in extreme times such as the Civil War, has there been such a mismatch between government spending and income in Spain. In contrast, the overspend last year was the smallest for ten years, at 2.9% of GDP, just below Brussels' ceiling of 3%.

Total government debt will reach 123% of annual national economic output at the end of this year, the IMF believes. It is calling on Spain to implement tax rises for higher-earners and companies to begin to plug the gap.

Forecast 1.5 million fewer jobs

With the tourist sector and many others suffering for the rest of the year at least, the government said this week that it estimates that 1.5 million fewer people will be working full-time at the end of 2020 than at the start. In its planning report for the new annual budget, it said that the workforce size will contract by 8.4%. A slow recovery is expected from next year.

Prices have fallen this year

Prices in Spain were up 0.2% in September compared to a month earlier, government data has also shown. This helped reduce the negative annual inflation rate to -0.4%, from -0.5% in August. Prices in Spain have been lower year on year for the past six months.

Housing market improvement

In other released data, the amount of home sales fell 12% in August, compared to the same month in 2019. This was positive news, as the drop was less than in July, when it was 32.4%, and the May peak of the pandemic, when there were 53.7% fewer transactions taking place.