pauljoy1548
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Doczy: 07 Gru 2023
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 Why does public debt remain at a high if that of households |
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Spanish public debt has remained at maximum values for six years, around 100% of GDP, despite the economic growth experienced in this period and the fact that households and companies have managed to deleverage. Because?
The key factor is the persistence of the public deficit, which skyrocketed during the crisis and has not yet managed to get back on track: as Email Data long as expenses exceed income, the debt in nominal terms will continue to grow and will only be reduced in terms of GDP if it grows less. than the economy does.
At the end of the third quarter of the year, the debt of all public administrations totaled 1,207,755 million euros, 30,006 million more than a year before and far from the 384,662 million with which 2007 ended.
In terms of GDP, the debt in the third quarter was equivalent to 97.8% of GDP, below the 98.9% of GDP in the third quarter of 2018, more moderate levels than the record of 100.9% of GDP reached in the first quarter of 2015 but far from the 35.8% of GDP with which it closed 2007.
This evolution contrasts with that of private debt - households and companies - which at the end of the second quarter totaled 1.6 trillion euros, 132.1% of GDP, well below the maximums of 2009 and 2010, when it exceeded 200% of GDP.
Funcas senior economist Mara Jess Fernndez explains that this contrasting evolution has its origins in the pre-crisis bubble, which fueled a level of activity “ above what is sustainable” based on private debt.
Household debt, which until 1999 was below 40% of GDP, reached its maximum of 85.6% of GDP in the second quarter of 2010. Similarly, business debt, which in 1999 was around 50% % of GDP, reached 119.9% of GDP that same quarter.
Until the beginning of the crisis, public debt remained more or less stable in nominal terms - it went from 374,557 million at the end of 2000 to 384,662 million in 2007 - but the economic growth of the bubble reduced debt in relation to GDP, which went from 57.8% to 35.8% in those years.
When the crisis arrives , "that bubble bursts ," continues Fernndez, and private agents react by reducing their debt - households containing spending and companies reducing investments - a trend that continues practically to this day.
The other side of the coin
The public sector , for its part, experienced an inverse process, since the end of the bubble destroyed jobs, companies and tax revenues, creating a fiscal deficit that had to be covered with debt, especially in the first years, until this was resolved. shot above 100% of GDP.
AFI analyst Salvador Jimnez adds as a key element the Social Security accounts, which went from surplus to deficit - initially due to job loss and, later, due to the contrast between low salaries and increasingly higher pensions -, which has led to an increase in debt in this way.
Thus, as the fiscal gap of public administrations has not yet been resolved - the Government plans to do so in 2022 -, nominal debt continues to increase, although doing so at a lower rate than economic growth reduces its amount as a percentage of GDP.
Furthermore, the lax monetary policy of the European Central Bank (ECB) has made it possible to lower the cost of debt and extend its terms, so that the average life of state debt is currently 7.62 years, when in 2007 it was 6. .85 years.
Looking to the future, experts agree to expect a certain stability of both private debt - companies have healthier balance sheets and households repay more mortgage debt than they are granted - and public debt.
Public debt, they point out, will be difficult to reduce beyond 90% of GDP in a context of economic slowdown, which makes it difficult to undertake fiscal adjustments, and with a strained Social Security, especially given the imminent retirement of the "baby boom" generation. , which will have high pensions.
The central scenario of the Independent Authority for Fiscal Responsibility (AIReF) estimates that public debt will fall to 87% of GDP in 2050, far from the threshold of 60% of GDP included in the European Stability and Growth Pact.
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