Spain’s central government budget deficit narrowed by 42 percent in the first nine months as tax revenue surged and spending cuts took effect.
The shortfall fell to 3.45 percent of gross domestic product from 5.96 percent a year earlier, the Madrid-based Finance Ministry said in a statement on its website today. Tax revenue on a cash basis rose 13.5 percent from a year earlier and personnel costs rose 2.7 percent.
The overall budget gap, which was 11.1 percent of GDP last year, also includes the regional administrations’ shortfall and the balance of the social security system, which had a surplus of 0.9 percent of GDP in the first nine months, the Labor Ministry said today. In the first half, the overall deficit fell to 3.54 percent of GDP from 3.86 percent a year earlier, the Finance Ministry said in a separate report today.
Spain, which emerged from an almost two-year recession in the first half, is cutting spending and increasing taxes to rein in the third-largest budget deficit in the euro region. The government reduced public workers’ wages by 5 percent in June and raised value-added tax in July as part of the deepest austerity program in at least three decades.
Pressure on the budget from higher borrowing costs is easing as the extra yield investors demand to hold Spanish bonds rather than German equivalents was at 158.8 basis points today, down from a euro-era high of 221.2 basis points in June.