España cierra 2024 con un déficit público del 2.8% del PIB, mejorando por quinto año consecutivo

El primer vicepresidente and the Minister of Finance, María Jesús Montero, at the press conference where she presented the data on the public deficit at the end of 2024

The set of public administrations closed 2024 with a public deficit of 44,597 million euros, equivalent to 2.8% of GDP. This is two tenths less than the 3% target for that year. In fact, it is the fifth consecutive year that Spain meets and even improves the deficit forecasts involved in the European Commission, as announced today by the first Vice President and Minister of Finance, María Jesús Montero, at the press conference organized to present the budget closure.

Specifically, the deficit in 2024 decreased by seven tenths, compared to the 3.5% of GDP recorded in 2023, representing a decrease of 8,072 million euros, that is, 15.3% less. Also, it is the first time since 2018 that Spain is below the excessive deficit threshold of 3% provided for in the European Union fiscal rules.

The deficit reduction is based on strong economic growth, with the Spanish economy tripling that of the euro area in 2024 and setting employment records. All of this allowed for a cleanup of public accounts in line with the consolidation of the welfare state.

Last year, Spain had to deal with the consequences of Dana, which devastated the Valencian community. If the impact of the measures taken to mitigate the damage caused by DANA were included, the public deficit for 2024 would be 3.15% of GDP. However, fiscal rules allow for the exclusion of the budgetary impact of natural disasters, as happened more than a decade ago with the Lorca earthquake.

The deficit data for 2024 continues the downward trend of the last four years. In fact, since the peak reached during the pandemic in 2020 at 9.9% of GDP, the public deficit has been reduced by over 7 percentage points, representing a 70% decrease. Specifically, the deficit decreased by almost 70,000 million euros and did so without applying social discounts.

The Minister of Finance, María Jesús Montero, explained during the press conference to present the budget closure data that the sustained reduction in the deficit makes Spain a «reliable country, with enviable economic stability that inspires markets and investors.»

In fact, Spain improved the forecasts for reducing the deficit from national and international organizations, which estimated a deficit of over 3% when the government presented its forecasts to the European Commission last April.

Montero emphasized the government’s effective economic policy as the main reason for the improvement in public accounts. In fact, Spain grew by 3.2% in 2024, well above the rest of the major EU economies, to the point where Spain accounted for 50% of EU growth last year.

Another key factor in reducing the deficit was the dynamism of employment with record figures, such as the 21.8 million employees, according to the fourth quarter of 2024. Spain accounts for 30% of the jobs created in the EU. Additionally, the unemployment rate was 10.6%, the lowest level in 16 years, and temporary employment decreased to 12.4%.

These impressive figures also have a positive impact on everyday citizens. In fact, the wages paid in 2024 increased by 5%, higher than inflation, allowing for increased purchasing power for workers. Additionally, the percentage of the population at risk of poverty decreased last year to 19.7%, the lowest in the historical series.

The central administration bears the cost of Dana’s measures

The measures taken by the government to mitigate the damage caused by Dana at the end of October 2024 had an impact of 5,590 million euros on the budget closure, representing 0.35% of GDP. From this amount, the central administration assumed 93% of the costs, that is, 5,186 million euros. The budgetary impact for the autonomous communities was 287 million; for local entities 60 million; and for Social Security, 57 million.

Once again, the state takes on the greatest fiscal effort, as was the case during the pandemic or the price increases resulting from the Ukraine War. It should be noted that the government has approved several rights in which it mobilized 16.6 billion euros, and in just two months of 2024, since Dana appeared, the impact has already reached 5.59 billion. The rest of the mobilized resources will have an impact in 2025 as the measures are implemented.

In any case, fiscal rules allow for the exclusion of budgetary impacts resulting from natural disaster catastrophes, as was the case with the Lorca earthquake. For this reason, the GDP deficit data of 2.8% does not include expenses related to DANA.

The impact of court rulings

On the other hand, the budget closure for 2024 includes the cost of various judicial rulings against measures taken by previous governments. Specifically, the impact of these rulings on public accounts last year amounts to 11,269 million euros. Of this amount, 8,000 million correspond to «one-off» expenses, meaning they will have no impact on future exercises.

Among the rulings included is the one affecting the group of mutualists for which an orderly procedure was established, so that IRPF returns were distributed over four years, depending on the exercise for which the refund corresponded.

However, the Minister of Finance announced today that, after «listening to groups, unions, and political groups,» a regulatory change will be promoted to maximize returns. «The goal is for taxpayers entitled to refunds to receive the returns simultaneously throughout this year,» Montero said.

Evolution of tax revenues

At the press appearance, the public revenues for 2024 were also announced. Specifically, tax revenues from the Treasury’s perspective amounted to 294,734 million euros, representing an 8.4% increase. An improvement in collection driven by increased employment and greater benefits for businesses.

The Minister of Finance also emphasized the taxes approved by the government, which particularly benefited the middle and working classes. In fact, in 2024 alone, taxpayers saved 4,700 million euros in taxes due to measures taken by the executive.

Taking into account all the tax cuts approved by the government since Pedro Sánchez took office, the reduction in taxes amounts to 38,000 million euros. The decrease in tax adopted, particularly to mitigate the impact of inflation, has mainly favored low and middle income.

If the collection data is analyzed by cash tax figures, the income from IRPF in 2024 increased by 7.6% to 129,408 million euros. The main cause of this growth was the dynamism of the labor market, as reflected in the 9% increase in labor restrictions and the economy.

In any case, it should be remembered that the government reduced IRPF for low incomes, resulting in a savings of 1,445 million for these taxpayers last year. Including the impact of the 2023 reduction, which was 1,726 million, the total savings amount to 3,171 million in two years.

The corporate tax was the tax figure that recorded the highest increase last year. Specifically, it increased by 11.5% to 39,096 million euros due to higher business profits, showing a good performance of the economy.

The VAT increased by 7.9%, to 90,541 million euros. An increase sustained by good consumption behavior. Finally, excise taxes increased by 6.6% to 22,128 million.

Subsector deficit

Regarding the budget closure, if the subsectors disaggregate the central administration, it closed with a deficit of 41,106 million euros, equivalent to 2.58% of GDP, compared to 2.02% the previous year. This figure implies compliance with the 2.9% target set for the central administration in the 2024 Budget Plan.

If the DANA impact is calculated, the subsector deficit would be 2.91% of GDP, after assuming that 93% of the cost of the measures to mitigate the natural disaster damage.

The behavior of the central administration is due, among other issues, to the impact of court rulings, amounting to 9,263 million euros. Additionally, to record transfers made to autonomous communities. In fact, the settlement has an impact of 13,523 million compared to the previous year’s settlement, representing historic resources for the autonomous communities.

Precisely, these transfer records to autonomous communities are reflected in reducing the deficit of this subsector, which closed with a deficit of 1,638 million euros, representing 0.1% of GDP, compared to 0.92% the previous year. In fact, all autonomous communities, except six, managed to close the year with a surplus. This good performance is due to the record income in the financing system for all territories, which received almost 20,000 million euros more than the previous year.

Likewise, local entities closed with a surplus of 6,642 million euros, equivalent to 0.42% of GDP. An improvement largely due to the increased resources transferred by the state in the financing system, with a 22.5% increase.

Finally, Social Security recorded a deficit of 8,495 million euros, 0.53% of GDP. This is slightly lower than the previous year. In this subsector, the 7.1% increase in social contribution revenues, which already reach 199,595 million euros, is due to the good performance of the labor market.

Recovery plan

The year 2024 also served to confirm the good pace of execution of European funds in the recovery, transformation, and resilience plan. In fact, Spain is already the country with the most benchmarks and transfers fulfilled in absolute terms (181 benchmarks and objectives) and the country that received several transfers with almost 48,000 million euros.

In this regard, the Treasury chief recalled that Spain has already requested the fifth tranche worth 25,000 million euros, which is valued by the European Commission.

The execution of the funds is consolidating, because between 2021 and 2024 the recognized obligations reached almost 82,000 million euros, representing 80% of the budgeted resources. These resources have already reached the real economy, as evidenced by 936,000 beneficiaries of the various calls resolved from the following generation funds, of which 40% are microenterprises and SMEs.

In addition, the co-governmental policy implemented with other public administrations allowed for the transfer to autonomous communities of up to 28,974 million in the recovery plan.