On track to meet deficit goals

Budget data show that we are on track to meet the 6.55 deficit/GDP ratio for 2013. The information collected so far refers to the first eleven months of the year, which means that one month before the year ended, the national budget imbalance (55.84 billion euros, or 5.44% of GDP) was about one percentage point away from what experts expected.

Without a doubt, we will not have a problem meeting budget once final annual numbers come in even though the Bank of Spain recently warned that the 2013 budget ratio could go up to at least 7%. The official explanation is that the measures that have been adopted are starting to have an effect as the risk premium falls and the economy strengthens. Yesterday, Luis de Guindos announced that the government now expects GDP to grow 1.0% instead of 0.7% in 2014. Local governments are still running a surplus thanks to the rigid spending restrictions.

The regional governments, while having a harder time, are set to meet their deficit goals for 2013. They also increased Social Security transfers by 25% in November. The system was able to use these credits, along with a dip into its reserve fund, to run a small 0.33% deficit. This allows system administrators to breathe a sigh of relief.

The outlook for 2014 is improving now that governments have met their objectives and looking forward to growth. Still, the national government should continue to oversee the regions and the Social Security system. Everyone should resist the temptation to spend too much leading into the next election, because the work of fixing our economy is not over.