- The Independent Authority for Fiscal Responsibility (AIReF) updates its macroeconomic forecasts for 2024 and 2025 and the stability target monitoring sheet including, for the first time, a preliminary estimate of the fiscal impact of the DANA measures
- AIReF raises the GDP growth forecast for 2024 by 0.2 points to 3.1% and for 2025 to 2.5%
- AIReF estimates that the measures announced to date to mitigate the effects of the DANA will have a fiscal impact of 0.6% of GDP for the General Government sector in 2024 and 2025
- AIReF estimates the deficit will close 2024 at 3.3% of GDP, including 0.3 points for the impact of the DANA. Excluding this impact, the deficit forecast for 2024 would be maintained at around 3% of GDP
The Independent Authority for Fiscal Responsibility (AIReF) today published the update of the macroeconomic forecasts and the stability target monitoring sheet on its website, in which it includes, for the first time, a preliminary fiscal estimate of the impact of the measures to mitigate the effects of the DANA. AIReF raises the GDP growth forecast for 2024 to 3.1% and the forecast for 2025 to 2.5%, and estimates the total impact of the DANA on the public deficit at 0.6% of GDP, spread over 2024 and 2025.
In the macroeconomic forecasts, AIReF incorporates the latest information available, including the latest Quarterly National Accounts (QNA) data published in December 2024 and the changes that have occurred to date in the exogenous technical assumptions on which the estimate is based, as well as the latest economic information known. This update implies an upward revision of GDP growth in volume terms by 0.2 points in both 2024 and 2025.
2024 is expected to close with higher growth, estimated at 0.2 points, of which 0.1 points can be explained by the QNA revision and 0.1 points by the positive surprise of the third quarter growth figure and, to a lesser extent, the upward revision in the fourth quarter estimate compared with the previous forecast. Accordingly, the estimate of the MIPred model reflects a more favourable performance of the very short-term indicators compared with the forecast a few quarters ago, with the forecast for the fourth quarter of this model standing at 0.8%.
The 2024 update has a significant carry-over effect on the 2025 forecast. The higher-than-expected growth in the third quarter of 2024 alone would explain almost 0.1 points of the 2025 revision, while the more recent indicator information for the end of 2024 and early 2025 would account for about 0.2 points of the revision. Conversely, the revision of the exogenous assumptions, which has little impact in 2024, subtracts 0.1 points from growth in 2025.
By component, the greater dynamism of domestic demand explains the revision in its entirety. In particular, the upward revision of the expected growth of consumption, both public and private, stands out, while the contribution of the foreign sector is revised downwards, especially in 2024, given the latest QNA data. On the price side, inflation in 2024 is 0.1 points lower than expected and remains practically unchanged in 2025.
As regards the macroeconomic impact of the DANA, AIReF points out that some estimates made – either on the basis of the size of the territory affected or the reduction in card payments – calculate this at 0.1 or 0.2 points lower quarter-on-quarter GDP growth in the fourth quarter of 2024. The available economic indicators provide little information in this regard. As for employment, according to data from the Ministry of Inclusion, Social Security and Migration published on January 3rd, the number of daily temporarily suspended employment contracts (ERTEs) due to force majeure points to an average impact of around 12,850 contributors in November and around 10,400 in December.
Stability target monitoring sheet
AIReF also publishes the monitoring sheet for the budgetary stability target which analyses the probability of compliance with the deficit targets as well as the evolution of revenue and expenditure for the General Government (GG) sector and the different sub-sectors. On this occasion, AIReF also includes, for the first time, an estimate of the fiscal impact of the measures implemented to address the effects of the DANA, which it calculates at 0.6% of GDP for the General Government sector in 2024 and 2025. The new information published is also included.
AIReF increases its headline deficit estimate for 2024 for the GG sector by 0.3 points to 3.3% of GDP, as it includes the measures approved to mitigate the effects of the DANA with an impact in 2024. Excluding this impact, the deficit forecast is maintained at 3% of GDP. The revenue observed up to October, in cumulative 12-month terms, is 0.3 points better than at the end of 2023, while expenditure is down by 0.2 points.
AIReF estimates that the measures approved to mitigate the effects of the DANA will have a fiscal impact of 0.6% of GDP for the GG sector, which will be distributed between 2024 and 2025. At the Central Government level, the Government has approved measures worth €16.65 bn through three royal decrees, while the Regional Government of Valencia has approved spending measures worth approximately €1.3 bn and has announced revenue measures with a limited impact. The Local Governments affected have also approved additional measures to those established by the State and financed by the latter.
The fiscal impact of these measures is mostly borne by the Central Government. Although some tax measures are included, such as tax deferrals, most are spending measures.
AIReF has preliminarily estimated the impact of these measures in national accounting terms at around €9.5 bn, a figure that is not directly comparable with the more than €18 bn announced by the GG, expressed in terms of potential mobilisation of financial and non-financial resources.
Of this difference, €4.7 bn correspond to the ICO guarantee line, whose impact on the public deficit would be approximately €300 m, attributable to the cost of the standardised guarantees. Moreover, the deferral of tax payments, such as the second Personal Income Tax instalment and taxes on SMEs and the self-employed, would have no impact in national accounting terms. Lastly, the estimated cost of certain measures has been adjusted in accordance with the data available on an initial estimate of the number of people and assets actually affected. For example, almost 32,000 workers finally benefited from ERTEs, compared with a higher number of potential beneficiaries included in the Regulatory Impact Analysis Report. Furthermore, the cost of other measures related to Social Security and Property Tax (Spanish acronym: IBI) compensation and the Tax on Economic Activities (Spanish acronym: IAE) has been adjusted, although only partial information is available.
By GG sub-sector, AIReF raises the Central Government deficit forecast for 2024 by 0.1 points to 2.5% of GDP; it estimates that the deficit of the Social Security Funds will close at 0.5%, 0.1 points less than in 2023; the Autonomous Regions will reach a deficit of 0.4% of GDP in 2024, once the impact of the DANA is considered and the Local Governments will record a surplus of 0.1% of GDP, with an effect of less than 0.1 points in that year.
