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Published: 05/10/2022

Assessment by the Fiscal Council: Assessment of the 2022 Stability Programme

The no-policy-change scenario in the 2022 Stability Programme foresees a gradual improvement in the fiscal situation. However, this improvement will be somewhat limited by the discretionary measures already adopted, and the envisaged 2025 deficit is set to be higher than last year, without taking into account the COVID-related measures. Revenue growth is expected to continue, largely based on the projection that relatively favourable macroeconomic conditions will continue despite a number of negative risks. High tax bases are the result of increased economic activity, due considerably to the expansionary fiscal policy, and the contribution of the higher inflation, which is also related to excess demand. In the medium term, the relatively favourable fiscal balance achieved before the epidemic will not be fully restored, mainly due to the adopted discretionary structural measures which, since the invocation of exceptional circumstances, have not been directly linked to mitigating the consequences of the epidemic. The adoption of these measures significantly limits the room to manoeuvre in terms of the future fiscal policy implementation. Given the fiscal situation and the current estimates of the cyclical position and despite the uncertainty related to the favourable macroeconomic projection, additional fiscal policy support is not necessary, as it could trigger important imbalances. Alternative estimates of expenditure levels and growth show that, even under the no-policy-change scenario, these are generally above the thresholds ensuring medium-term fiscal policy sustainability. The fiscal policy’s main aims should be to ensure sustainable growth in current spending, to respond in an appropriate manner to development challenges and to strengthen the economy’s resilience with efficient investments financed, to the greatest possible extent, with a higher amount of available European funding.

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