Since 2020, the INE national reports and the evolution of other important economic indicators, which have always been consistent, have suffered from a lack of correlation. This Monday, statistics admitted that at least 20,000 million GDP (gross domestic product) remained to be registered until at least 2022, and the value of economic activity increased by 1.3 points (one tenth in 2020, nine more in 2021 and three tenths more than last year). .
This amendment does not prevent a gap in the national accounts and data recorded on job creation, company sales growth or tax collection. Specifically, another 60,000 million (five points more), according to the calculations of various experts, including those published by Francisco Melis and Miguel Artola in elDiario.es.
Positive figures for the labor market collected by Social Security and corporate activity and tax revenue collected by the tax agency indicate that GDP has been understated, and continues to be so after this Monday’s review. “I think the revision was lower than expected. I expected a revision above two points and it remained at 1.5,” observes economist José Moises Martín.
“In my opinion, we will see another review in 2024, coinciding with the European review,” continues the expert. “The dissonance is less compared to income and employment, but it’s still dissonance,” he argues. The adjustment to the national accounts is automatically translated into Spain, which will complete its recovery from the Covid shock in 2022, earlier than previously estimated and in line with the rest of Europe.
The review demolishes one of the main economic criticisms of the People’s Party and the far right of the coalition government: the delay in the post-pandemic recovery. In fact, according to the latest forecasts from the European Commission, Spain will not only lead the growth of the Eurozone with an increase of more than 2%, but will also exceed the pre-pandemic level of GDP by 2.2 points. On the other hand, Germany, France and Italy, which are experiencing a larger slowdown in their economies, lag behind in this comparison.
“I was expecting something between one and two points,” says Angel Talavera, chief European economist at Oxford Economics. “It seemed to me that a GDP revision of six or seven points or more was unthinkable,” he adds. Although he notes that “it’s true, there remains some disconnect with other economic data, so future revisions are always possible.”
However, “Personally, I think today closes the door to a much larger revision given that the 2020 figures have barely moved,” says Angel Talavera.
“Based on other fiscal and industry-related indicators, I expected much more…” – argues economist Eduardo Garzon. “The data is still not collected and probably because the INE does not want to show the ‘shame’ so quickly, I believe that in 2024 they will revise the GDP once more, thus adjusting its real value more.” “, he explains.
On the one hand, Social Security workers have now reached 21 million, a record number. Employment growth has opened an unusual gap of eight percentage points with the evolution of GDP. What is normal is that their behavior matches. Now, after INE’s review of national accounts this Monday, while the number of social security subsidiaries in our country is about 8% higher than before the pandemic, GDP will close in 2023 just 2 points higher.
“A new revision that is more closely related to the evolution of employment and incomes is not excluded,” agrees Raymond Torres, director of economic conditions at Funcas. “But I think the review should be on a smaller scale. In this case, the main adjustment concerns 2021, which was greatly affected by the statistical disruptions of the pandemic. The next review will primarily affect fiscal year 2022. More distant are the disruptions of the pandemic,” he adds.
As for the collection, the evolution of the tax bases of all taxes of the tax agency (total money on which the state is taxed) and the calculation of GDP of the INE differed by 18 percentage points before this Monday’s update. For now, gross domestic product still doesn’t reflect all of the sharp increase in tax revenue from pre-pandemic levels, which, if partially explained by inflation, is largely due to increased activity.
In short, more contracts, more consumption, more investment means more taxes. While higher prices and wages mean more income, the Bank of Spain recently admitted that inflation explains less than half of the rise in tax revenues. Similar differences between INE and tax agency data exist in relation to companies’ consumption or sales.
In the second derivative, our country has less debt (as measured by the debt-to-GDP ratio), less deficit (which is the budget imbalance relative to GDP), and more tax increases on the wealthy and the sectors that have benefited. Inflation to increase their profits, such as banking or energy (since the tax burden was also low).
In a specific example of the debt/GDP ratio, the INE update this Monday means that the debt closed in 2022 1.6 points below 113%, which was previously calculated. “Thus, the goal set in the stability program to reduce it below 110% in 2024 has been postponed until 2023”, – defends the Ministry of Economy.
“The debt is improving, but not by much. It’s still very high. That is, the deficit and the debt are marginally improving, but going from 112% to 110% is not really a big deal,” laments Jose Moises Martin.
Source: El Diario