AIReF warns that debt could reach 120% of GDP

AIReF warns that debt could reach 120% of GDP

The Independent Authority for Fiscal Responsibility warns that the percentage of debt over GDP will stabilize around 120% in the coming years in the absence of expansionary measures.

In its Debt Observatory, this would be the institution’s inertial scenario in the absence of contractionary measures, with the hypothesis that Spain will return to its path of potential growth and close “the GDP gap” over the next five years.

The body notes that in the first nine months of 2020, public debt has increased by almost 120,000 million euros, reaching 1.3 trillion euros. This represents an increase in the debt-to-GDP ratio of 18.6 points compared to the end of last year, to 114.1%, its maximum value in the last hundred years.

The institution expects the debt to rise this year almost 23 points, reaching 118.4% of GDP by the end of the year. For 2021, it expects, on the contrary, a reduction of 2.4 points, up to 116%, but under the hypothesis that all the projects included in the General State Budgets will be executed. Both forecasts are in line with those presented by the Government.

In the current financing conditions, AIReF estimates that the financial burden of the debt “does not represent a worrying spending pressure in the short term.”

AIReF affirms that the containment of the health crisis and the normalization of economic activity will be “essential elements” for the stabilization of the debt-to-GDP ratio in the coming years.