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Finance and Budget

Sunday 31 December 2017

​The General State Budget (Spanish acronym: PGE) is the document setting out the annual plan of revenue and expenditure commitments for the State public sector. The General State Budget is one of the Government's key economic policy instruments, and sets out the strategic goals of the various public policies and the funds allocated to pursuing them.

It falls to Central Government to draw up the General State Budget, which is then passed over to Parliament to be reviewed, amendments proposed and its ultimate approval. The Spanish Constitution of 1978 guarantees the principles of financial autonomy, coordination and solidarity in Spain's administrative system in its three tiers of government (central, regional and local), and hence both the regional governments and local authorities enjoy financial autonomy to approve and administer their own budgets.

The legal framework of the General State Budget is fundamentally enshrined in three laws: the Spanish Constitution, particularly Article 134 regulating the General State Budget; the General Budget Act 47/2003, of 26 November, and Constitutional Law 2/2012, of 27 April, on Budget Stability and Financial Sustainability.

The path of fiscal consolidation

During the period from January to August, the State posted a deficit of 21.5 billion euros, equivalent to 1.84% of GDP, 1.01 points lower than the figure posted last year, which stood at 2.85% of GDP.

This figure is the result of a 5% year-on-year hike in revenue and 3.6% less expenditure over the period from January to August. The State's primary deficit, which excludes servicing debt, stood at 0.32% of GDP, with a fall of 71% to August.

General State Budget for 2017

The main goal of the State's accounts for 2017 is to bed down economic growth and the sustainability of the public finances. At this time, the Spanish economy has recovered levels of positive growth - of 3.2% in 2015 and 2016 - the highest figures since 2007, and well above the Eurozone average and of our main peer countries. Spain has returned to the path of economic growth with a positive and upward trend in the rate of job creation, thus reducing the high unemployment rate.

This Budget is designed to strengthen the credibility of the Spanish economy by continuing down the path of fiscal consolidation that guarantees reducing the public deficit to 3.1% by the end of 2017, and thus facilitating Spain's exit from the excessive deficit procedure in 2018.

Public Employment

Following approval of the General State Budget for 2017, the Council of Ministers proceeded to the approval of the Royal Decree on the Public Employment Offer (Spanish acronym: OEP) of Central Government for 2017, with close on 16,000 posts on offer (10,300 for new recruitments and more than 5,600 through internal promotion), as well as the Royal Decree-Law on the Extraordinary Offer, which includes close to 4,300 additional posts to combat tax and employment fraud, and to improve the provision of certain public services to citizens.

Together with the posts provided for under these two legislative acts, there are close to 8,000 other posts announced in the Royal Decree-Law adopted on 31 March that approved the public offer for teaching staff, servicemen, national and regional police officers and Guardia Civil officers. 

Hence, the sum total of the Public Employment Offer for 2017 exceeds 28,200 posts, the highest figure since 2008.

Outlook for the future

In April 2017, the Ministry of the Treasury and Public Function updated the Stability Programme of the Kingdom of Spain. This update improves the forecasts for growth of GDP and job creation on the previous review. It also maintains Spain at the head of the table for growth among developed countries, which will allow the public deficit to drop below 3% in 2018 with a primary surplus. The new projection for estimated annual growth over the next four years stands at 2.5% (from 2.7% this year, to 2.4% in the years 2019 and 2020) with similar rates for job creation, which will mean the creation of half a million jobs each year. The unemployment rate will fall to 11.2% by the end of 2020, the lowest level since mid-2008.

The projected fiscal strategy for the period 2017-2020 primarily seeks to achieve healthy public accounts, with the aim of placing and maintaining public debt on a downward trend, of guaranteeing the sustainability of the public accounts as a fundamental element in continuing to strengthen the credibility of the Spanish economy, of fostering growth and job creation and of strengthening the Welfare State.