Catalonia, Madrid, the Basque Country, and Valencia closed 2024 with a negative budget balance.

The Foundation for Applied Economic Studies (Fedea) recently published a report in which it places Catalonia, the Community of Madrid, the Basque Country, the Valencian Community, and Murcia as the five regions that closed 2024 with a negative budget balance, while Extremadura was the region with the largest surplus, up to 1.6% of GDP.

This is evident from the report on the estimation of the structural balance of the autonomous communities prepared by Manuel Díaz (Fedea), Carmen Marín (Fedea) and Diego Martínez (Pablo Olavide University and Fedea).

After adjusting the budget balance, experts have estimated a structural deficit for the autonomous communities of -1.1% of GDP in 2023 and 2024.

Without making any adjustments and looking solely at the budget balance, the regions with a budget deficit in 2024 were the Valencian Community (-1.9%); Murcia (-1.1%); the Basque Country (-0.6%); Catalonia (-0.4%); and Madrid (-0.2%).

In contrast, considering the budget balance, the regions with a surplus were Extremadura (1.6%); Navarre (1%); the Canary Islands and Asturias (0.9%); Cantabria (0.8%); Andalusia (0.7%); the Balearic Islands and Aragon (0.3%); Galicia (0.2%); and Castilla-La Mancha. In the case of Castilla y León and La Rioja, the balance is zero percent.

In its report, Fedea has made various adjustments, such as shifting the settlements of the regional financing system to their calendar year. "This settlement adjustment rose to 0.1% in 2023 and 0.7% in 2024, both in terms of GDP," it explains.

Secondly, the impact of the economic cycle on public accounts has been discounted; in this sense, with all regional governments in an expansionary phase of the cycle, this has generated public surpluses of 0.1% of GDP and 0.2% of GDP in 2023 and 2024, respectively.

For calculation purposes, these cyclical surpluses will increase the negative values of the structural balances. Finally, "the budget balance must also be reduced by the amount of non-recurring transactions."

In this context, Fedea highlights the "heterogeneity" between autonomous communities. "This estimated structural imbalance would reach levels of around -2% of GDP in 22 autonomous communities, such as Valencia, Catalonia, and the Region of Murcia. Only two regions have a positive structural balance: the Canary Islands and Navarre," the report concludes.