04.11.2020  Testimony before the Parliamentary Budget Committee in relation to the Draft State Budget for 2021* Pablo Hernández de Cos Governor  *Traducción al inglés del discurso original en español  Ladies and gentlemen, I appear before this Committee as part of the process to discuss and approve the State and Social Security Budget for 2021. The main aim of this Budget should, in my view, be to provide for the recovery of the Spanish economy in the coming quarters and to mitigate the considerable adverse impact caused by the COVID-19 pandemic to our economic growth and welfare. I shall begin by first describing the recent behaviour of the Spanish economy and, against a background marked by exceptional uncertainty, its possible course in the coming quarters, in light of the Banco de España’s projections. This description will allow me to assess the Government’s macroeconomic forecast which, as is habitually the case, frames the Draft Budget. Secondly, I shall offer my view of the main aspects of the Draft Budget for 2021, including the fiscal policy stance, its composition and the risks to the budget deficit target being met. Lastly, I shall set out what I consider to be the most significant challenges for Spanish fiscal policy in the medium term.
Admittedly, since the publication of our latest projections more details have become known on the use that could be made of the NGEU programme in Spain in the short term (many of which are included in the Draft Budget we are addressing here today). But notable uncertainty persists over the ultimate level of actual execution of this programme in Spain, and over the capacity of the potential projects finally selected and implemented to increase the Spanish economy’s growth potential. I shall refer again to this matter when discussing the macroeconomic forecasts of the Draft Budget. But first, allow me to mention one final factor which, undoubtedly, has critically influenced recent Spanish and global dynamics. It is a factor that will continue to play a key role in the coming quarters and years in managing and overcoming this crisis. I refer here to the economic policy response. To date, the measures taken by economic policymakers (in the fiscal, monetary, labour market and financial areas) in response to the outbreak of the pandemic have most significantly mitigated its impact. They have eased the downturn in real activity and in economic agents’ income and liquidity, and they have headed off the materialisation of systemic risks to the functioning of the financial markets and banks’ financial stability. From the outset of the health crisis, fiscal policy, both in Spain and in most developed countries, has reacted resolutely.