The debt of the public administrations as a whole rose in the first quarter to the historical maximum of 1.393 trillion euros, reaching a record of 125.3% of GDP. They are all-time highs in absolute terms and the highest figure in relative terms since 1881. You have to go back to the nineteenth century to find such a high debt over GDP, according to the historical database of the International Monetary Fund
In this way, public debt has exceeded the previous highs that were in 1902 , when government debt reached 123.6% of GDP. Now, 119 years later, public liabilities recorded in the excessive deficit protocol (the method used by Brussels to record debt) exceed that milestone by almost two percentage points to reach 125.3% of GDP.
Although Spain’s public debt is one of the highest in the entire Old Continent, there are still countries such as Italy (155% of GDP), Greece (200% of GDP) or Portugal (133%) that present levels of indebtedness over GDP higher than Spain, which is in fourth position.
A historically high deficit
To put these public debt data into context, it is important to bear in mind that the public deficit for 2020 was 123,072 million euros (11.0% of GDP). In relation to 2019, it represents an increase of 87,435 million euros and 8.1 percentage points of GDP, as explained by the CaixaBank research department.
Of this 11.0% deficit, 0.9% corresponds to the negative equity of Sareb at the end of 2020 after its reclassification by Eurostat as a public entity. Without including Sareb, the public deficit would have increased to 10.1% of GDP. The deficit figure, although very high, has been below our forecast and that of the Government itself (which estimated 11.3% of GDP without counting Sareb).
According to the economists of CaixaBank Research, the large increase in the deficit in 2020, as a result of the context of the pandemic, has been produced by a fall in public revenue of 5.0% year-on-year (the Government’s forecast was 5.5% ) and an increase in public spending, including interest but not aid to Sareb, of 10.1% (the Government’s forecast was 11.8%). Excluding interest, public spending increased 11.4%.
Carlos Balado, professor at OBS Business School and director of Eurocofin, assures in a note that “this increase in debt shows that the challenges that the Spanish economy must face in the coming years are of great importance and are closely related to each other.
The government will have to address them with a long-term structural reform strategy that it will have to make known with enough time and clarity so that all economic agents can analyze how it will affect them. “
By the end of 2021 the public debt could be contained, in principle, if the growth of the economy is strong enough to offset the new public deficit of this (in the end the debt can be corrected by an increase in the denominator or a correction of the numerator of the debt / GDP equation).
The Government has recognized that the annual misalignment of public accounts will reach 8.4% of GDP this year , so that a more than remarkable growth of the economy is needed to cushion this impact on public debt.