The Government expects short-term rates to remain at negative levels and long-term rates to rise

The Government expects short-term rates to remain at negative levels and long-term rates to rise

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The Government expects short-term interest rates to remain at negative levels similar to those of 2019 this year, experiencing a “slight contraction” in 2021, in line with the accommodative monetary policy expected in the euro area, while for the Long-term interest rates augment increases, with the profitability of ten-year Spanish public debt standing at 1.25% in 2021.

These forecasts appear in the update of the Stability Program 2020 sent last Thursday night by the Executive to Brussels and presented on Friday at a telematic press conference by the third vice president of Economic Affairs and Digital Transformation, Nadia Calviño, and the Minister of Treasury and government spokesperson, María Jesús Montero.

The Executive estimates that short-term interest rates (three-month Euribor) would remain this year at negative levels similar to those of 2019, going from -0.36% last year to -0.35% this year, and experience a “slight contraction” in 2021, down to -0.39%.

For long-term rates (10-year public debt) it augurs increases, so that they will go from 0.66% last year to 0.98% this year, with the profitability of Spanish public debt at 10 years standing at 1, 25% in 2021.

The forecasts of the Executive suggest that the public deficit will increase from 2.82% of the GDP of 2019 to 10.34% this year and that, at the end of the year, the public debt reaches 115.5% of the GDP, which means 20 percentage points more than the ratio of 2019 (95.5% of GDP).

This increase is explained by the contraction of nominal GDP, which due to a denominator effect would increase the ratio by 10.8 points, as well as by the primary budget balance and the interest paid, which would contribute 7.7 and 2.6 points respectively to the increase in public debt.

Despite the notable increases in public deficit and public debt expected, the Government assures in the Stability Program that it is expected that the budgetary deviation registered in 2020 “will begin to correct as of 2021, once again placing the public deficit on a downward path, along with public debt, which will allow us to fulfill the commitments made at the community level. ”

In fact, the Government highlights that the ratio of public debt to GDP decreased in Spain for the fourth consecutive year last year, standing at 95.5%, doubling the rate of reduction of the previous three years and achieving a further reduction 2 percentage points between 2019 and more than 5 points from the maximum, reached in 2014.

According to the Government, the reduction in the ratio in 2019 is explained by the growth of nominal GDP, by the stock-flow adjustment, by the “favorable” evolution of interest rates in the debt markets and by good Treasury management. aimed at reducing net debt issues with respect to what was expected, as well as financial expenses.

In line with the “Government’s commitment to fiscal consolidation”, he explains to Brussels that the extraordinary savings and income have been used to accelerate the reduction of the debt / GDP ratio.



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