The Government of Spain expects the economy to return to pre-pandemic COVID-19 levels by 2022

Moncloa Palace, Madrid

The Government has agreed a non-financial spending limit for 2022 of 196.142 billion euros, which is the highest figure in history in the allocation of resources for the next General State Budget, as highlighted by the Minister for Treasury and Public Function, María Jesús Montero.

This is a key step in processing the draft budget law, together with the publication on 28 June of the Ministerial order laying down the rules for its drafting.

Montero stated that the objectives for the public accounts in 2022 are consolidating the economic recovery and safeguarding the welfare state, "key to expanding the middle class, which is the true engine of our country". The minister pointed out that the government is committed to building a stronger, fairer and more productive Spain "among all of us".

In this regard, the Minister for Territorial Policy and Government Spokesperson, Isabel Rodríguez, has expressed her confidence that the opposition groups will support these objectives in the parliamentary process: "Agreement is a value, understanding generates wealth, creates employment and this is a maxim that we should all incorporate to work on this path of dialogue that will undoubtedly contribute to our country".

Sustaining pensions

María Jesús Montero pointed out that the 196.142 billion euros set as the spending ceiling includes 18.396 billion euros as a transfer to the Social Security System - 32% more than last year - in order to sustain the pensions pillar in line with the recommendations of the Toledo Pact, "one of the priorities for this government".

It also includes 25.622 billion from the European Union for the Recovery, Transformation and Resilience Plan.

Suspension of fiscal rules also in 2022

The Minister for Treasury and Public Function reported that the agreement reached today includes a request to the Lower House of Parliament to assess that the extraordinary circumstances, derived from the pandemic, continue to exist to incur a structural deficit and that the obligation to establish stability objectives and fiscal rules can continue to be suspended, as in 2021.

However, the Minister for Treasury and Public Function, María Jesús Montero, recalled that the Government and all Public Administrations maintain their responsibility in relation to fiscal consolidation and budgetary sustainability, which is why reference rates have been set.

Thus, the deficit for 2022 has been set at 5% for Public Administrations as a whole, which is 3.4% less than the 8.4% expected at the end of 2021.

The State Administration will assume most of this percentage, 3.9%, as it did last year to protect the other administrations, which are "the ones that sustain the welfare state, health, education and social services", Montero pointed out. The rate for the regional governments stands at 0.7% and for local entities it will remain at zero.

Macroeconomic forecasts

The First Vice-President of the Government of Spain and Minister for the Economy and Digital Transformation, Nadia Calviño, has highlighted that the report on the state of the Spanish economy shows a very positive evolution since mid-March, which has been consolidated in the second quarter with growth that could exceed 2% of Gross Domestic Product (GDP).

Positive economic developments and employment recovery

During the presentation of the macroeconomic scenario, Calviño stated that "all indicators and forecasts point to a strong economic recovery in the second half of the year". In this respect, she stressed that the dynamism of employment is the best reflection of the strength of the recovery. The number of workers in Temporarily Redundant has fallen from one million at the beginning of February to 340,000, a third of them in part-time ERTE.

In the same vein, self-employed people covered by the extraordinary unemployment benefit stood at around 160,000 at the end of June, the lowest in nine months. And Social Security affiliation recorded the highest growth in the historical series in June, even surpassing the gross affiliation levels in 2019.

The minister stressed that more than 90% of the net employment lost as a result of the pandemic could be recovered in July and the Government's priority would be the reinstatement of the 340,000 workers still covered by ERTE.

Nadia Calviño put forward that if the evolution of employment continues to be positive, an increase in the Minimum Wage could be studied in September, which would allow progress to be made "towards the objective of 60% of the average wage that we have set for the end of the legislature".

Upturn in consumption

The recovery in employment, according to the minister, is accompanied by an upturn in consumption. In addition to quantitative indicators, such as spending on cards or demand for energy, qualitative indicators also reflect a recovery of the economy. Consumer and business expectations have improved and tourism has been revived thanks to the vaccination progress.

The Minister for the Economy stressed that all analysts predict that Spain will recover its pre-pandemic GDP level by 2022 and that by 2023 it will be on its previous growth path.

Calviño added that the set of measures to support families, workers and companies adopted by the Government since the beginning of the pandemic "have formed a safety net, a social shield that has been key to cushioning its economic and social impact and protecting a base for economic recovery".

GDP to grow by 6.5% this year and 7% next year

The Executive maintains its growth forecasts at 6.5% for 2021 and 7% for 2022, in line with the macroeconomic forecasts shared in April, with an upwards revision of the contribution of the external sector, thanks to the increase in exports of goods during the first quarter of the year.

Nadia Calviño explained that private consumption is showing great dynamism due to the gradual reopening and the net savings of households, which, according to government estimates, stood at 60 billion euros during the first quarter of the year.

The minister also highlighted the dynamism of investment, particularly in capital goods, although she slightly revised the forecast for investment in construction downwards. Foreign tourism would reach a level slightly below 50% of that recorded in 2019 and domestic tourism would reach 75%.

The unemployment rate will remain at around 15% this year and 14% next year. On this point, Nadia Calviño stressed that Spain is facing the fifth wave of the pandemic with a lower rate than that predicted by institutions such as the Bank of Spain or the OECD, which placed it between 20% and 25%. In addition, she said that the Government's reports reflect progress in ecological transition, digital transformation, gender equality and social cohesion, which are at the heart of the recovery, transformation and resilience plan.

Calviño reiterated that thanks to the measures adopted since March 2020, the Executive has softened the negative social impact of the crisis, has responded with instruments to prevent an increase in inequality, protect the most vulnerable groups and mitigate the deterioration of business solvency.

Crea y Crece (Create and Grow) Law to encourage business start-ups

The Government has launched in a public hearing the Preliminary Draft of the Crea y Crece Law, which aims to promote the creation of companies and encourage their expansion through regulatory improvements, the elimination of obstacles to economic activities, the fight against commercial delinquency and financial support for business growth.

Nadia Calviño has detailed that the future law includes improvements in four areas. It facilitates the incorporation of companies, which can be created digitally and with share capital of one euro. It includes measures to combat late payment in commercial transactions, extending the obligation to issue and send invoices electronically invoices to all companies and self-employed people in their commercial relations, which will ensure greater traceability and control of payments.

The regulation also improves the business climate and the regulatory environment for economic activities, reinforcing cooperation with the regional governments and local corporations, and modifies the functioning of the Market Unity Law. It also includes measures to improve business growth financing instruments other than bank financing, such as crowdfunding.

30,445 vacancies in the Public Employment Offer for 2021

The Council of Ministers has approved the Public Employment Offer for 2021, which includes 30,445 positions, 8.5% more than last year. 13,982 vacancies are for free admission and 9,509 for internal promotion for the State Administration. The rest relate to the Armed Forces and State Law Enforcement Forces and Agencies and were approved by Royal Decree.

This offer is "the largest in the historical series", said the Minister for Public Function, María Jesús Montero. Added to those of the previous three years, this means that the current government has created 110,000 public employment positions, 73% more than in the previous six years, from 2012 to 2017.

Montero reiterated the importance of the public sector in relation to the protection of people and the need to articulate a modern, agile and transparent administration, capable of accompanying the challenges of transformation contained in the Recovery, Transformation and Resilience Plan, which has "An Administration for the 21st century" as one of its policy levers.

In line with these objectives, the Public Employment Offer emphasises activities connected to the Plan: 12% of the vacancies are for those linked to digital transformation; more than 10% for the modernisation of the tax system; 8.4% for justice reform; and more than 5% for health and resilient infrastructures and ecosystems. In addition, the number of science, technology, engineering and mathematics (STEM) positions will be enhanced, with a 37% increase in the number of vacancies compared to 2020.

Other Agreements

• Approval of the UniDigital Plan for the modernisation and digitalisation of the Spanish university system, with a budget of 77 million euros for 2021-2022.
• Approval of the Catalogue of Urgent Measures against Gender Violence, within the Plan for Improvement and Modernisation against Gender Violence.
• Authorisation the contracting of reservation and occupation of places in the Thermalism Programme by the Institute for the Elderly and Social Services (IMSERSO).
• The creation of the Interministerial Commission to develop the Artist's Statute is approved.
• The distribution among regional governments of almost 23 million euros to support the care of unaccompanied migrant children has been authorised.
• A grant of 30 million euros awarded for the programme for the fight against poverty and basic social services in the Canary Islands.

Non official translation