Deficit of Public Administrations, excluding Local Authorities, shrank by 1.19 GDP percentage points to September

On its website on Tuesday, 28 November, the Ministry of the Treasury and Public Function published the State deficit figures corresponding to the month of October, together with the figures for the consolidated deficit of the Central Government, Autonomous Regions and Social Security, excluding Local Authorities, for the month of September, all in national accounting terms.

State deficit (October)

To October, the State posted a deficit of 12.87 billion euros, equivalent to 1.1% of GDP. This deficit is 0.94 percentage points lower than the figure recorded in the same period of the previous year, which stood at 2.04% of GDP.

The improvement in the State deficit is largely due to the increase in non-financial revenue, mainly as a result of taxes, up by 4%, and lower non-financial expenditure, which dropped to October by 3.2%.

If we exclude accrued interest, the positive primary balance amounts to 0.77% of GDP, versus the primary surplus of 0.05% of GDP recorded in the same period of 2016.

Non-financial State revenue

Non-financial State revenue to October amounted to 153.18 billion euros, a year-on-year increase of 3%.

Revenues from taxes and contributions totalled 140.43 billion euros, of which 79.16 billion corresponds to tax on production and imports, which includes VAT which grew by 6% year-on-year.

Meanwhile, current taxes on income and property totalled 55.12 billion euros. This group of taxes includes, among others, Personal Income tax (IRPF) which rose by 1.6% due to the growth in income tax and corporate tax withholdings, up this month by 1.1 % year-on-year. Equally significant was the increase in income tax on non-residents, up by 13.3% year-on-year.

With regard to other revenues, property income fell by 11.6%, due, as mentioned in previous reports, to lower dividends from the Bank of Spain, which shrank by 584 million in 2017.

Conversely, we should highlight the increase in interest accrued from Autonomous Regions and Local Authorities investment fund loans, which jointly increased by 389 million to October compared with the same period of 2016.

Non-financial State expenditure

Non-financial State expenditure stands at 166.05 billion euros, a drop of 3.2% to October.

This drop is largely due to a general reduction in expenditure, with a 6.4% drop in interest expense, 2.3% in remuneration of salaried workers, and 10.2% in intermediate consumption. There has also been a 1.9% drop in transfers between Public Administrations (current and capital), which are the largest items, mainly due to lower transfers made to the State Public Employment Service, down by 2.74 billion euros, as a result of the positive trend shown by the job market. With regard to capital expenditure, gross fixed capital formation is down by 9.8% year-on-year.

On the expenditure growth side we would highlight social benefits other than social transfers in kind which increased by 2.2% year-on-year, largely as a result of a 3.9% growth in civil service pensions.

Combined deficit of the Central Government, Autonomous Regions, and Social Security (September)

In the first three quarters of the year the consolidated deficit of the Public Administrations, excluding Local Authorities, stood at 22.98 billion euros. This figure excludes the net balance of aid to financial institutions, which at month-end September amounted to a negative figure of 403 million euros. In GDP terms, the deficit is equivalent to 1.97% as at September, below the 3.16% recorded in the same period of 2016.

Central Government

To the third quarter of the year, the Central Government posted a deficit of 1.47% of GDP, excluding financial aid. If financial aid is included the deficit would be 1.5% of GDP, including the State deficit (1.46% of GDP) and the deficit of Central Government agencies (0.04% of GDP) corresponding to the month of September.
The Central Government deficit shrank by 40.1% compared with the same period of 2016, due to a 4.2% increase in revenue and a 3.7% drop in expenditure.

Autonomous Regions

To September, Spain's Regional Administrations posted a surplus of 992 million euros, compared with a deficit of 2.04 billion recorded in the same period of last year. This performance has been mainly influenced by higher advance payments, up by 3.15 billion on the previous year's payments, and the definitive settlement of 2015, carried out in July 2017, with an increase of 983 million on 2014. Conversely, we should highlight the higher expenditure relating to the remuneration of salaried workers and intermediate consumption, up by 1.9% and a 2.9% respectively on the third quarter of 2017.

Social Security funds

Social Security funds posted a deficit of 6.86 billion euros to September, equivalent to 0.59% of GDP, in line with the 0.55% posted in the same period of last year.

With regard to Social Security funds we should highlight the growth in revenues from social contributions, up by 5.6% to September, entirely offsetting the lower volume of transfers received from the State (-19.1%).

Meanwhile, social benefit expenses are up by 1.7%, mainly due to an increase in benefits paid out by the Social Security System, which grew by 3.3%, compared with a 7.5% drop in unemployment benefits.

As has already been mentioned, the lower surplus of the State Public Employment Service, despite the improved job market, is due to the fact that the volume of transfers received from the State to September fell by 2.42 billion. In turn, the Social Security System reduced its deficit by 6% to 0.69% of GDP, with revenues up by 3.9% versus a 3% increase in expenditure. Finally, the Wage Guarantee Fund (Spanish acronym: FOGASA) posted a more positive result, moving from a deficit of 82 million euros in the third quarter of 2016 to a surplus of 91 million to September this year.

Non official translation