Covid-19 has widened the gap between the levels of public debt in Madrid and Catalonia, after rising almost three times more in the Generalitat. After this year’s correction, the indicator for Madrid will show a rise of 0.7% and that for Catalonia of 2.3%. However, neither Madrid nor Catalonia will be able to fully correct the deviation of their public debt after the coronavirus crisis that broke out in 2020.
The Covid-19 pandemic and its impact on public accounts has widened the gap between both autonomous communities. Catalonia will end this year, according to AIReF forecasts, with a debt of 35.7% of regional GDP. Madrid, for its part, will end the year with a ratio of 14.6%.
AIReF updated its debt observatory this week and included sustainability analysis files by autonomous community. The agency points out that in the first quarter of 2021 public debt has continued to grow sharply, reaching a new maximum and placing it at 125.2% of GDP.
It is also pointed out that, although for the year 2024 a decrease in the ratio of 7.6 points is projected mainly due to the effect of growth, a gradual and sustained reduction of the public deficit will be necessary to redirect the debt towards the levels prior to the pandemic throughout the next decade.
Madrid will end this year with a debt of 14.6% and the Catalan will rise to 35.7%
The Observatory highlights that the high level of public debt has placed public finances in a position of great vulnerability and cites as the main risks for sustainability in the medium term the higher spending on pensions derived from aging and tightening of financing conditions .
The macro fiscal forecasts prepared by AIReF project a cumulative reduction in the regional debt ratio of 1.6 points of GDP for the year 2021, placing the subsector ratio for that year at 25.5%.
In his opinion, the high economic growth estimated for the coming years will be the main factor in the reduction and stabilization of the regional debt ratio. In contrast, a significant deterioration in the regional balance is expected in 2022, which would lead to a need for financing greater than that existing before the crisis.
Projections at the territorial level show a decrease in the unequal debt ratio in the different autonomous communities. The Valencian Community, the Balearic Islands and the Region of Murcia, would be the territories that would see their debt grow the most in 2021 in relation to 2019, from previous levels that are already high.
In the coming years, AIReF foresees that both the Basque Country and the Canary Islands will be at the reference level of 13%, while Madrid and Navarra would be at values close to that level. With a debt ratio close to 50% of its GDP, the Valencian Community would be the community with the most vulnerable position.
The report indicates that under a scenario of correction of the primary deficit, the level of debt (23.7%) registered at the end of 2019 at the end of this decade would recover again.