The Independent Authority for Fiscal Responsibility (AIReF) endorses and considers feasible the forecasts for 2023 presented by Madrid, the Canary Islands and Valencia. These macroeconomic forecasts are made against a backdrop of uncertainty that complicates their assessment at a national level, but heightens them at a territorial level since the latest information available on the Spanish Regional Accounts relates to the year 2020 and is not in line with the information for the country as a whole following the statistical revisions published in the month of September.
Although the forecasts by the three Autonomous Regions are higher than AIReF’s, those of Madrid and Valencia fall within the range of estimates of the consensus of analysts and are lower than those in the macroeconomic outlook that accompanies the General State Budget. The forecast for the Canary Islands also falls within the range of estimates of the consensus of analysts, but is higher than the forecast in the macroeconomic outlook that accompanies the General State Budget. However, the nominal growth estimated by the Canary Islands for 2023 is identical to AIReF’s estimate.
The macroeconomic scenarios of these regions are framed in a context in which the materialisation of a number of risks identified by AIReF since the end of 2021, and particularly over the course of 2022, will impact the economic outlook of the European Union and Spain in the coming years. Specifically, AIReF indicates the risks surrounding the energy crisis, the persistence of inflation and the tightening of financing conditions.
Madrid
Madrid’s estimates point to GDP growth of 4.6% in 2022. Although this falls within the range of forecasts available by other private bodies and institutions, AIReF considers that the scenario is optimistic compared with its forecast. For 2023, Madrid estimates GDP growth in volume terms of 1.8%. Although the GDP rate of change forecast by AIReF of 1% is lower than the Region’s own forecast, this forecast falls within the range of estimates of the consensus of analysts of the Autonomous Regions and is lower than the forecast in the macroeconomic outlook that accompanies the General State Budget. Taking these constraints into account, AIReF considers that the forecasts for 2023 presented by this Region are feasible and, as such, endorses them.
AIReF stresses that, given the importance of medium-term planning, it would be desirable to include a macroeconomic scenario that covers a period greater than that of the general annual budget.
It also stresses that Madrid complies with the recommendation to submit to AIReF, prior to the publication of the draft budget, information on the macroeconomic forecasts that underpin it and the corresponding request for endorsement. It also complies with the advice on good practices to include a comparison with other independent forecasts. However, this Region bases its forecasts on the estimates of other institutions and thus does not employ or include details of the econometric techniques, models and parameters or the assumptions used in its macroeconomic forecasts.
Valencia
According to the macroeconomic scenario of Valencia, regional GDP could grow by 4.4% in 2022. This forecast falls within the range of forecasts available by other private bodies and institutions and is lower than AIReF’s estimate, although the great uncertainty and downside risks that exist should be taken into account. For 2023, this Region estimates GDP growth in volume terms of 2%, an estimate that is practically in line with AIReF’s estimate of 1.9%. The forecast by the Region falls within the range of estimates of the consensus of analysts and is lower than the forecast made in the macroeconomic outlook of the General State Budget for 2023. Accordingly, AIReF considers that the forecasts are feasible and endorses them.
AIReF stresses that, given the importance of medium-term planning, it would be desirable to include a macroeconomic scenario that covers a period greater than that of the general annual budget. In this regard, Valencia offers growth forecasts up to the year 2024. It also stresses that Valencia complies with the recommendation to submit, prior to the publication of the draft budget, the information on the macroeconomic forecasts that underpin it and the corresponding request for endorsement. Valencia complies satisfactorily with the advice on good practices to include a comparison with other independent forecasts and to provide detailed information on the econometric techniques, models and parameters and on the assumptions used in its macroeconomic forecasts. However, to include more homogeneous information and facilitate its comparison, the advice on good practices to include expenditure forecasts in terms of the Regional Accounts is reiterated.
Canary Islands
The Canary Islands has prepared alternative growth scenarios for 2022 and 2023, establishing a central scenario, along with an optimistic and a pessimistic scenario. The Region’s estimates point to GDP growth that could range from 6.3% to 9%, with growth of 7.6% in the central scenario. The figures for 2023 range from 1.3% under the pessimistic scenario to 5.2% under the optimistic scenario, with 3.3% as the central estimate.
The central estimate is higher than AIReF’s estimate of 1.5%, which is more in line with the pessimistic scenario. Furthermore, the central scenario estimate is higher than the Government’s estimate contained in the macroeconomic outlook that accompanies the General State Budget, although it would fall within the range of forecasts made by other institutions. Overall, this Region presents a complete macroeconomic scenario that includes deflator forecasts. In this regard, the nominal growth estimated by the Canary Islands for 2023 is identical to AIReF’s estimate. Accordingly, AIReF endorses the forecasts of the Canary Islands for 2023. However, it considers that the real growth forecast in its central scenario is optimistic, while the forecast in the pessimistic scenario is feasible.
AIReF underlines that the Canary Islands complies with the recommendation to submit to AIReF, prior to the publication of the draft budget, the information on the macroeconomic forecasts that underpin it and the corresponding request for endorsement, although the draft budget was published on October 25th. The Region has also followed the advice on good practices to include a comparison with other independent forecasts and to provide detailed information on the econometric techniques used in its macroeconomic forecasts. However, to facilitate the evaluation of the macroeconomic forecasts, the advice on good practices to include expenditure forecasts in terms of the Regional Accounts is reiterated. Finally, as with the other Autonomous Regions that have received a report on their macroeconomic forecasts, AIReF makes a recommendation to the Canary Islands to include the assumptions on the macroeconomic impact associated with the Recovery, Transformation and Resilience Plan (RTRP) for the period forecast among the information provided
