Pablo Hernández de Cos: Testimony before the Upper House Parliamentary Budget Committee

Testimony by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, before the Upper House Parliamentary Budget Committee in relation to the Draft State Budget for 2021, Madrid, 11 December 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
15 December 2020

Ladies and gentlemen,

My appearance before this committee is part of the passage through Parliament of the State and Social Security budgets (the Budget) for 2021. The main aims of this Budget, in my opinion, should be to mitigate the considerable adverse impact of the COVID-19 pandemic on Spain's economic growth and welfare, to facilitate economic recovery and to lay the foundations for addressing the Spanish economy's structural challenges.

In order to provide you with an assessment of the extent to which this Draft Budget contributes to these aims, my speech will revolve around three main themes. First, I will describe the recent behaviour of the economy and will suggest how it may behave in the coming quarters, for which purpose I shall make use of the macroeconomic projections that the Banco de España has published this morning. This description will allow me to assess the macroeconomic forecast which forms the basis for the Draft Budget. Second I will give my views on the main budget figures, highlighting the overall fiscal policy stance, the composition of revenues and spending, and the risks that may jeopardise achievement of the budget deficit target. Finally, I will set out the main challenges that fiscal policy must address in the medium term.

1 The Spanish economy: recent developments and outlook

As we all know, in the first half of this year the spread of the pandemic and the measures deployed to contain it caused an unprecedented slump in global economic activity, which reached its nadir in the spring.