In 2023, the fiscal position of communities improved compared to the previous year, but fell short of expectations. Despite improvements in collection and significant regional financing resources, more than half of the territories exceeded the deficit goal of 0.6% of GDP. The largest deficits were in Valencian Community, Murcia, Extremadura, Catalonia, Castilla-La Mancha, and Andalusia, all reaching double the established rate. The gap between regional income and expenditure stood at 0.91% of GDP, three tenths above the reference rate.
As the year progressed, the deficit grew rapidly and reached 0.91% in the last quarter. Without system settlements, it would have been much higher. Five territories ended 2023 with a surplus while others struggled to meet their deficit targets.
Several factors contributed to the slow correction of the regional deficit. Changes in non-financial resources available to territories affected their financial performance. While tax revenues increased significantly due to increases in income and wealth taxes, expenses also grew as a result.
The dynamics of non-financial transactions also affected the deficit due to transfers received from other public administrations. The evolution of the deficit was further influenced by employee remuneration, interest rates, and subsidies for specific products and services.
Fiscal rules are currently suspended due to this situation but significant effort is needed from regions like Valencian Community, Murcia, Andalusia, Castilla-La Mancha and Catalonia to maintain public services.
In conclusion, despite some improvements in collection and regional financing resources; communities’ fiscal position still fell short of expectations due to various factors such as changes in non-financial resources available to territories and dynamics of non-financial transactions that affect their financial performance
