The Economy of Catalonia

As is well known, estimating inter-territorial fiscal balances is a relatively
complex methodological task, which calls for several assumptions to be
made about the final impact of public spending and taxation. It also requires
appropriate statistical indicators at the regional level. Despite these
difficulties, we now have reasonably reliable estimates. In 2008, the Catalan
and Spanish governments made estimates referring to 2005. 2 The
results, while not identical, are quite similar. In both cases two approaches
were used to allocate expenditure: benefit approach and cash-flow
approach., 3
Since then, the Spanish government has not released any more recent
estimates. For its part, the Catalan government has regularly published
its own. The latest were issued in 2013 and cover the 2005-2010 period.
Table 1 provides six different calculations based on these data. For
each approach (benefit and cash-flow approaches), there are two possibilities,
according to whether the central government budget is “neutralised”
or not (i.e., whether taxes and expenditure are, or are not,
calculated «as if» the central government budget were balanced). The
reason for «neutralisation» is to correct the effect of the deficit (or surplus)
that could distort the results, because in years when the central
government budget presents a deficit (or surplus) it would be possible,
hypothetically, for all autonomous communities to have positive (or
negative) net fiscal flows. Moreover, «neutralisation» can be done in
two ways, using either the total expenditure or the total revenue of the
Spanish government.
Consequently, there are six possible estimates, which are listed in Table
1. According to these estimates, Catalonia’s fiscal deficit in 2010 amounted
to 3.0% of GDP (cash-flow approach) or 0.4% (benefit approach), if
2. See Departament d’Economia i Finances (2008) (Government of Catalonia) and
Ministerio de Economía y Hacienda (2008) (Government of Spain). The Spanish government
made estimates for all the Autonomous Regions and the Catalan government
did so only for Catalonia. Both were published in 2008 and refer to 2005. Both were
prepared by groups of independent experts. The Catalan government appointed a
committee of distinguished scholars and experts. The Spanish government commissioned
the work to the Institute of Fiscal Studies, which appointed a group of advisers,
likewise renowned.
3. According to the cash- flow method, Catalonia’s fiscal deficit was 9.8% (Catalan
government) or 8.7% (Spanish government) of GDP. According to the benefit method
itwas 7.4% (Catalan government) or 6.5% (Spanish government). These data are given
without balancing (or «neutralising») the Spanish budget, which had a surplus that year.
two preliminary remarks... 37