The fiscal deficit of Catalonia remains above 21,000 million euros

BarcelonaCatalonia contributed 77.742 billion euros to the state coffers during 2022 (19.3% of the total from autonomous communities) and ended up receiving 56.650 billion (14% of the total). That is, the Catalan fiscal deficit was 21.092 billion euros. This is the data from the latest fiscal balances calculated by the Generalitat, which ARA has had access to, and which will be made public this Friday as soon as the Government approves the budget project for 2026. Catalonia's fiscal deficit stood at 8.2% of GDP, more or less the average since 1986 (8.1%). Each Catalan therefore contributed 2,670 euros more than they received.

The results for 2022 are similar to those presented by the previous Minister of Economy, Natàlia Mas, although they break the upward trend that had been in place since 2012: in 2021, the Catalan fiscal deficit rose to 22.013 billion euros (9.6% of GDP), a figure that marked a historic record. Does this mean that the Generalitat's situation has improved? Not really. The structural deficit is entrenched and the Government has no more room to maneuver with the current financing model.

Sources from the Department of Economy consulted by ARA point out that the decrease is mainly explained by a certain recovery in social security balances after the covid pandemic. In 2021, the social security deficit in Catalonia – managed by the State – exceeded 8.2 billion euros – heavily conditioned by EROs and post-pandemic aid – and, in contrast, in 2022 it stood at 5.7 billion. However, the social security deficit has a worrying trend, which leads us to predict that it will again have a negative impact on Catalan fiscal balances: if in 2019 it was 3.5 billion euros, three years later, after overcoming the pandemic, it had already reached 5.7 billion.

Catalonia's fiscal deficit with the central public sector

"Catalonia contributes to revenue in a proportion above its weight in GDP [in 2022 it represented 18.8% of GDP and contributed 19.3%]; in contrast, it receives a share of expenditure that remains below its population weight in the State as a whole [in 2022 it had 16.4% of the population and received 14% of the expenditure]," is reflected in the budget annex. Since 2012, the law has obliged Catalan governments to present the latest available fiscal balances together with the budgets.

Calculation methods

As usual, the Government will present the balances using two different calculation methods. The deficit of 21.092 billion euros corresponds to the monetary flow method, which has traditionally been the one most embraced by the Generalitat. It consists of calculating how much the central administration spends according to the territory. The other method is the burden-benefit method, in which the expenditure made by the State on services for all citizens, regardless of where they live, is also imputed: for example, expenditure on security and defense, the cost of Congress and the Senate, or European policies.

Using the burden-benefit method, Catalonia had a fiscal deficit of 14.665 billion euros in 2022 (5.7% of GDP). A year earlier, the deficit had been 15.778 billion (6.9% of GDP). Government sources therefore emphasize that the fiscal deficit is between these 14.665 billion and the 21.092 billion indicated by the two methods.

Catalonia's fiscal balance

The calculations made by the Generalitat are based on data published by the Ministry of Finance, but not all the necessary data are always known. This is a structural shortcoming that all Catalan governments have had and which they tried to resolve by forcing the Spanish government to publish its own territorialized fiscal balances. Pedro Sánchez's government has not yet done so, although it has committed to it: for now, it is negotiating with Junts the method by which they should be calculated.

Another characteristic of the Catalan calculations is that they neutralize the effect of the State's deficit, meaning they assume the central administration is in equilibrium. Government sources acknowledge that, if this deficit were imputed, approximately 6 billion euros more would have to be added to State expenditure, and therefore, the fiscal balances would be affected: using the burden-benefit method, the Catalan fiscal deficit would be around 8 billion euros, and using the monetary flow method, around 15 billion euros.

New financing model

Since 2002, the annual average of Catalonia's fiscal deficit has been 8.4% of GDP (monetary flow), a figure that successive Generalitat governments have considered excessive. The way to counteract this structural situation is to change the rules of the game. The current financing model has proven insufficient, and the independence project did not achieve its objectives. There are now at least two proposals on the table. Recovering the idea that Artur Mas put forward in 2012, Junts is calling for a Basque-style economic agreement, which for now has met with outright rejection from both the Spanish government and the rest of the state parties.

The other proposal was presented in early January by the Minister of Finance, María Jesús Montero, with the support of ERC. According to the ministry's data, Catalonia would manage to earn 4.686 billion euros more in 2027 and, at least for that year, it would guarantee ordinality (it would be third in contributing and third in receiving). The processing of the new financing model is expected to be revived from March, although for now there is no majority in Congress that supports this proposal either.