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Stability Programme Update Kingdom of Spain 2017

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Stability Programme Update Kingdom of Spain 2017 STABILITY PROGRAMME UPDATE KINGDOM OF SPAIN 2017 - 2020 2017-2020 Stability Programme Update e-NIPO 057-17-061-9 2017-2020 Stability Programme Update TABLE OF CONTENTS 1. EXECUTIVE SUMMARY ................................................................................................ 5 2. INTRODUCTION ........................................................................................................... 7 3. MACROECONOMIC OUTLOOK ............................................................................... 10 3.1. Recent evolution of the Spanish economy ...................................................10 3.1.1. International environment ........................................................................10 3.1.2. Recent evolution and correction of macroeconomic imbalances in Spain in 2016 ..........................................................................................................12 3.2. Assumptions of the Macroeconomic Scenario ............................................15 3.3. 2017-2020 Macroeconomic Scenario ............................................................17 3.4. Comparison with the scenarios of other organisations ............................... 22 4. PUBLIC DEFICIT AND PUBLIC DEBT ........................................................................... 25 4.1. The General Government in 2016 .....................................................................25 4.2. The General State Budget for 2017 ................................................................. 30 4.2.1. The State Budget for 2017 ........................................................................31 4.2.2. Social Security budget ..............................................................................35 4.3. 2017-2020 Fiscal strategy. Analysis of measures and budgetary impact .. 37 4.3.1. 2017-2020 Fiscal strategy ..........................................................................37 4.3.2. Tax policy ....................................................................................................41 4.3.3. Labour Market and Social Security Measures ....................................... 44 4.3.4. Reform measures of the Public Administrations .................................... 46 4.4. The role of Regional Governments and Local Entities in the fiscal strategy ......................................................................................................................48 4.4.1. Regional Governments .............................................................................48 4.4.1a Budget for 2017 ........................................................................................48 4.4.1b. Regional Governments Measures ........................................................50 4.4.2. Local entities ..............................................................................................54 4.5. Public debt forecasts ........................................................................................56 4.6. Cyclical orientation of the fiscal policy ..........................................................58 5. COMPARISON WITH THE PREVIOUS STABILITY PROGRAMME. SENSITIVITY ANALYSIS ....................................................................................................................... 61 5.1. Comparison with the previous Stability Programme .................................... 61 5.2. Risk scenarios and sensitivity analysis ..............................................................62 5.2.1. Change in interest rates ...........................................................................63 5.2.2. Change in economic growth of the trade partners ............................ 63 5.2.3. Change in oil prices ..................................................................................64 -1- 2017-2020 Stability Programme Update 6. THE SUSTAINABILITY OF PUBLIC FINANCES ............................................................. 66 6.1. Long-term budgetary projections ...................................................................66 6.2. Strategy ...............................................................................................................68 6.3. Contingent liabilities ..........................................................................................73 7. THE QUALITY OF PUBLIC FINANCES ......................................................................... 76 7.1. Expenditure composition .................................................................................76 7.1.1. Expenditure Review in the Regional Governments .............................. 78 7.2. Composition of revenue ..................................................................................80 8. INSTITUTIONAL FRAMEWORK OF THE FISCAL POLICY ............................................ 83 8.1. Public procurement ..........................................................................................83 8.2. Relations with the independent fiscal institutions ......................................... 84 8.3. Payment to suppliers .........................................................................................85 8.4. Transparency and access to public information .......................................... 85 8.5. Transparency in the field of Regional Governments .................................... 86 ANNEX ............................................................................................................................ 87 -2- 2017-2020 Stability Programme Update TABLE OF CONTENTS DE CUADROS Table 3.2.1. Basic assumptions of the Macroeconomic Scenario 2017-2020 ........... 16 Table 3.3.1. Macroeconomic Outlook ........................................................................... 17 Table 3.3.2. Labour Market .............................................................................................. 18 Table 3.3.3. Prices developments ................................................................................... 19 Table 3.3.4. Sectorial balances ....................................................................................... 19 Table 3.4.1. Comparison of Macroeconomic scenarios 2017-2018 .......................... 24 Table 4.1.1. Balance of the General Government in 2016 ......................................... 25 Table 4.1.2. The General Government in 2016 ............................................................. 26 Table 4.1.3. The Central Government in 2016 ............................................................... 27 Table 4.1.4. The Regional Governments in 2016 ........................................................... 28 Table 4.1.5. The Local Entities in 2016 ............................................................................. 29 Table 4.1.6. The Social Security Administrations in 2016............................................... 30 Table 4.2.1.1. State Revenue Budget for 2017 .............................................................. 31 Table 4.2.1.2. State Expenditure Budget for 2017 ......................................................... 33 Table 4.2.1.3. Economic distribution of the State Expenditure Budget for 2017 ...... 34 Table 4.2.2.1 Social Security Revenue Budget for 2017 ............................................... 35 Table 4.2.2.2. Social Security Expenditure Budget for 2017 ......................................... 36 Table 4.3.1.1. Budgetary projections .............................................................................. 40 Table 4.3.2.1. Revenue coming from the fight against customs and fiscal fraud ... 43 Table 4.3.2.2. Tax bases of the main taxes in accrual terms ....................................... 43 Table 4.4.1a.1. 2017 Budget of the Regional Governments ....................................... 49 Table 4.5.1. Debt stock-flow adjustment in 2016 .......................................................... 57 Table 4.5.2. Public debt developments ......................................................................... 57 Table 4.6.1. Cyclical developments ............................................................................... 58 Table 4.6.2. Discretionary effort indicator ...................................................................... 60 Table 5.1.1. Differences with the previous Stability Programme update .................. 61 Table 5.2.1.1. Impact of a 120 b.p. increase of the interest rate ............................... 63 Table 5.2.2.1. Impact of a 4 p.p. fall in the export demand growth ......................... 64 Table 5.2.3.1. Assumptions about the oil price (euros/barrel) .................................... 64 Table 5.2.3.2. Impact of an increase in oil prices of 6 euros/barrel ........................... 65 Table 6.1.1. 2013-60 Projections of ageing-related expenditure ............................... 66 -3- 2017-2020 Stability Programme Update Table 6.2.1. Summary of S2 indicator ............................................................................. 71 Table 6.3.1. Outstanding amount of guarantees granted by General Government . 75 Table 7.1. Fiscal Adjustment 2011-2016. Subsector breakdown ................................. 76 Table 7.1.1. Evolution of the number of public employees ........................................ 77 -4- 2017-2020 Stability Programme Update 1. EXECUTIVE SUMMARY The 2017-2020 Stability Programme Update presents a prudent and realistic macroeconomic scenario based on conservative assumptions. The Independent Authority for Fiscal Responsibility (AIReF) endorses the macroeconomic projections
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