The adjusted structural balance of the autonomous communities suffered a notable deterioration between 2022 and 2023, with a drop of 1.1 points of GDP, which represents the worst balance in history, apart from the year 2020, marked by the pandemic.
These data are collected in a report presented today by Fedea under the title “The structural balance of the autonomous communities 2022-2023”. The adjustments applied to the budget balance show that The structural balance of the regions was 0.2% of GDP in 2022 and -0.9% in 2023, reflecting a drop of 1.1 points last year.
Among the communities most affected by this worsening, Extremadura, Andalusia and the Balearic Islands stand out. On the other side, the regional communities and Cantabria presents the most favorable evolution. In 2023, Asturias, Cantabria and Navarra recorded structural public surpluses, while the Valencian Community, Catalonia and the Region of Murcia recorded the largest structural deficits.
The report prepared by Manuel Díaz (Fedea), Carmen Marín (Fedea) and Diego Martínez (Pablo Olavide University and Fedea) allows to obtain a more precise picture of the real financial balance, eliminating temporary or cyclical factors. One of the main adjustments is made to the regulations of the Autonomous Financing System (SFA), following the recommendations of the AIReF. This adjustment has been essential, especially in 2022, when the the liquidation reached an unprecedented value of 1.5% of GDP, contributing to a significant reduction in the public deficit.
Fedea also points out that The impact of the economic cycle was moderate. In 2022 and 2023, cyclical balances showed limited variations between regions, in part because national resources from the Autonomous Financing System (SFA) represented 60% of cyclical income. But in 2023, The cyclically adjusted balance deteriorated sharply, going from +0.6% of GDP in 2022 at -0.9%, the worst record since the exceptional year of 2020, when the pandemic had a serious impact on public accounts. The case of Extremadura stands out, going from a cyclical surplus of +2.5% to a deficit of -1%.
The increase in regional spending also played a role in this deterioration, with measures adopted in 2022 which will impact budgets for years to come. The increase in personnel costs alone cost 700 million euros in 2023, and an additional impact of 300 million is expected in 2024, particularly in the education and health sectors. These adjustments confirm that the deterioration of the structural balance in 2023 was already predictable from 2022.
In years of negative regulations, as happened in 2020, the State has chosen to tolerate or postpone them, thus allowing the autonomous communities to avoid an immediate impact on their finances. However, when the balances are positive, as happened in 2022 with 1.8% of GDP, the autonomy receives these revenues as if they were permanent, thus increasing discretionary spending.
Future adjustments
Concerning the regional public balance figures, Fedea underlines that Future budgetary adjustments, in the context of the new European economic governance, represent a challenge for regional governments, due to the significant existing structural public deficit.
According to think tank experts, this challenge requires “to launch, once and for all, a reform of the regional financing system to remedy its main deficiencies and adapt it to the new national budgetary governance framework.
Furthermore, they consider that Regional executives must “adopt responsible tax policies”both in the expense control as well as income management, especially with the return of budgetary rules. »
From 2024, they must adapt to deficit and debt targets, which involve reducing the deficit below 3% and public debt to 60% of GDP, in line with the new fiscal governance framework.
