Moderate fiscal slippage likely for Spain this electoral year

In 2015 Spain'scyclically adjusted fiscal balance will be slightly accommodative. The consolidated budget balance through April has been reduced by 10.7% y/y, the deficit reached 1.05% of GDP. 

"Moreover, the government has announced cuts to the personal income tax rate, applicable in July 2015 and worth EUR1.5bn. Overall, the extent of fiscal slippage this year might not be large (less than 0.5%), mainly because strong growth is compensating somewhat, but a tighter fiscal stance will be needed in 2016 to meet the government's medium-term fiscal targets and debt-reduction objectives", says Barclays. 

Some downside risk is seen to the deficit target of 4.2% of GDP, mainly related to the electoral cycle. Public expenditure was higher than expected in Q1 15, probably driven by the regional and municipal elections in May. Similar slippages are expected on public expenditure in H2 15. 

"The deficit target for 2016 is 2.7% of GDP and the government expects public debt to fall slightly in 2016, after peaking this year at nearly 99% of GDP", added Barclays.