New data from the EU’s statistics agency, Eurostat, reveals Spain’s general government deficit stood at 4.3 per cent of GDP in 2016 – far higher than other bloc members.
France had the second-largest deficit at the end of 2016 with 3.4 per cent, followed by Romania with 3 per cent.
While the negative imbalance was below the EU limit of -4.6 per cent, Spain’s economic forecast looks increasingly uncertain given the ongoing unrest in Catalonia.
Following the wealthy region’s standoff with the government in Madrid after the illegal independence referendum earlier this month, Catalonia’s largest bank has issued a major warning in a bid to end the uncertainty.
CaixaBank SA CEO Gonzalo Gortazar said deposit withdrawals had been “moderate” since the October 1 referendum, but the political drama has forced the lender, along with a number of other major Catalan forms, to leave the region and set up legal bases elsewhere to avoid the continuing uncertainty.
He said: “I have full faith in our leaders that this issue will resolved soon, but it will start to have an impact if it drags on.”
Mr Gortazar believes any “instability” coming from plans to reach a solution will not be long-lasting and right now, he does not believe there will much much of an effect on the bank’s forecast for a 2.7 per cent increase in Spanish GDP next year.
He added: “If the situation develops in a different way, obviously we will expect the impact on GDP will be a bit more than moderate.”
Meanwhile Cercle d’Economia, a business association, warned in a statement: “If it can’t avoid it in the coming days, Catalonia could be on its way towards a prolonged and intense dynamic of lack of control, legal insecurity and civic unease.
“Its consequences are unpredictable, but in any case dramatic in terms of self-government, coexistence, economic growth and employment.”
Despite the high budget deficit, Spain did manage to reduce its public debt to 99 per cent of GDP in the last quarter of last year, down from 99.4 per cent in 2015.
Spain’s debt at the end of 2016 stood at €1,107billion, which implies an increase of €33.271million in a year.
The EU countries with the highest debt ratio in 2016 were Greece, with a staggering 180.8 per cent, followed by Italy (132 per cent), Portugal (130.1 per cent), Cyprus (107.1 per cent) and Belgium (105.7 per cent).