The International Monetary Fund expects half of the increase in financial pressures to persist in the post-Covid period

The International Monetary Fund expects half of the increase in financial pressures to persist in the post-Covid period

Since the Covid outbreak, Spain has become the second eurozone country (after Cyprus) where the weight of income over GDP has increased more, and according to the International Monetary Fund (IMF), at least half of this increased fiscal pressure is here. To stay. Since 2019, the weight of income over GDP in Spain has increased by about four points, from 39.2% to 43% of estimated 2024 GDP, slightly closer to the eurozone average of 46.4%. The International Monetary Fund notes in one of its recent reports on the Spanish economy that “the income boom made it possible to halve the income gap in Spain’s GDP compared to its peers.”


The question, according to this body, is to know “to what extent the rise in tax revenues” in Spain is due to temporary or permanent factors, because this will be an essential element when designing the fiscal consolidation plans required by the government. New EU fiscal rules (the IMF itself estimates 3% of GDP, an adjustment needed until 2028). Well, according to the Washington-based body, the greater weight share of income in GDP is expected to persist, “in the range of 2 to 2.5 percentage points, over the medium term” (2.5 points of GDP equates to about 39,000 million euros ).

This is because, first, “in the medium term, the increase in the income-to-GDP ratio associated with employment growth is likely to continue, as long as the labor market remains strong” in Spain. The IMF also does not expect that the increase in personal income tax revenues caused by inflation (11,000 million since 2019, according to the Bank of Spain) will disappear overnight, in addition to measures that many regional governments have already taken to mitigate this increase. In addition, Social Security revenues are expected to continue to increase as the increases in social contributions expected in the pension reform are implemented.

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In the same way that the IMF expects that between 2 and 2.5 points of GDP of more revenue will be integrated into the Spanish economy, in the opposite direction, it can also be said that part of this greater pressure, 2 to 1.5 points of GDP The GDP (between 31,000 and 23,000 million) will disappear and the government will not be able to rely on it to balance its future accounts.


These are some of the conclusions that emerge from documents related to the Spanish economy that were published by the International Monetary Fund last week, as part of the international body’s periodic reports on various countries. The IMF remembers what happened in Spain after the great financial crisis of 2008: after the real estate collapse, incomes collapsed and it took several years to recover. However, after the outbreak of the pandemic, “additional income did not suddenly decline as a share of GDP despite the significant contraction in output during the pandemic.”

Regulatory changes

Economists have not yet been able to explain all the reasons that might explain the post-pandemic tax revenue miracle, in a context in which there were more tax cuts than tax increases. Although some study centers, such as the Juan de Mirena Institute, document a total of 69 increases in taxes and contributions since 2018, data from the annual reports of the IRS reveal that the reductions were more intense, such that regulatory changes became the last four years resulting in a net loss. In revenues exceeding $8,000 million in the state. Most of these cuts were intended to compensate for the effects of the coronavirus and the high cost of energy and food on household income.

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In the Autonomous Communities, there were also tax cuts during this time (only for 2024, a decrease of 2.051 million is estimated in the Autonomous Communities).

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