The forgiveness would reset Catalonia’s debt to the levels of 2011

The partial forgiveness of debt agreed between ERC and PSOE in the agreement for the investiture of Pedro Sánchez will cause the proportion of Catalonia’s debt in relation to GDP to go from the current 31% to 24.6% at the end of 2024, which It would mean placing this ratio at 2011 levels.

This would be approximately the impact on said indicator of the partial reduction of 15,000 million from the Autonomous Liquidity Fund (FLA) included in the investiture agreement, according to estimates from the Department of Economy of the Generalitat provided to EFE.

According to the latest data from the Bank of Spain, Catalonia’s debt currently amounts to 84,549 million euros, the largest in absolute terms of all the autonomous communities.

However, in relative terms the most indebted community in relation to its GDP is the Valencian Community, with a debt ratio of 41.2%, while second place is for Castilla-La Mancha, with 31.2%, and the third for Catalonia, with 31%.

The average for the autonomous communities is 22.3%, while the Community of Madrid has a debt ratio in relation to its GDP of 13%, always according to data for the third quarter of the year published by the Bank of Spain.

Progressive reduction

Catalonia has been reducing the proportion of debt in relation to GDP since 2020, the year of the outbreak of the pandemic, when it reached its ceiling, with 37.4%, because Covid-19 caused a collapse in GDP of 11.5% .

In 2021 the proportion of debt in relation to GDP was reduced to 35.5%, favored by the partial recovery of growth, while in 2022 this ratio was also reduced again to 33%, driven by GDP growth Catalan. EFECOM stands out.

In 2023, a year in which Catalonia will close with a GDP growth of 2.4%, this indicator has also continued to fall, to 32.6% in the first quarter, to 32.4% in the second and finally to 31. % In the third.

When this forgiveness of 15,000 million by the State becomes effective – an agreement that should be finalized in 2024 -, Catalonia’s debt in relation to GDP will fall to 24.6% at the end of 2024.

In this way, the weight of the debt with respect to GDP would be at the level of 2011, since that year it was 22.2%, and a year later, in 2012, it increased to 27.1%, so the application of this partial debt forgiveness will mean going back a decade in that regard.

The GDP of Catalonia reached 255,153 million in 2022, compared to 261,713 million in Madrid, with which Catalonia represents 18.95% of the national GDP, compared to 19.44% for the Community of Madrid.

credit quality

Just a few days ago, the Canadian agency DBRS Morningstar maintained Catalonia’s credit rating at BBB low, the first step of the so-called investment grade, but improved its outlook from stable to positive due to the partial debt reduction included in the investment agreement. . .

That agency pointed out that the agreement “will probably alleviate the very high debt burden of Catalonia”, in reference to the pact between PSOE and ERC to forgive Catalonia a total of 15,000 million of debt from the Autonomous Liquidity Fund, a partial reduction that the State has Open the door apply to all communities.

In fact, this agency assured that Catalonia’s current credit rating could improve “if the debt relief mechanism is implemented and this allows a rapid and substantial reduction of Catalonia’s debt burden” and if, at the same time, ” “the political and institutional relationship between Catalonia and the central government continues towards normalization.”