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Fitch: Spanish Autonomous Communities' Results Better Than Expected
April 28, 2017 / 10:30 AM / 8 months ago

Fitch: Spanish Autonomous Communities' Results Better Than Expected

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Spanish Autonomous Communities: Preliminary 2016 Results here BARCELONA/LONDON, April 28 (Fitch) Fitch Ratings-Barcelona/London-xx April 2017: The preliminary 2016 results of the Spanish autonomous communities indicated a significant improvement from 2015 with a current balance equivalent to negative 1.7% of current revenue (negative 9.4% in 2015), says Fitch Ratings. However, it is the seventh consecutive year the sector has reported a negative current balance. Current expenditure only grew 0.4% yoy and after several years of austerity measures, Fitch had forecast that the Spanish regions' current expenditure would have grown above the budgeted 2.2% (see 2016 Outlook: Spanish Autonomous Communities - Risk of Increasing Expenditure, published in February 2016). Preliminary 2016 results also showed an improvement of the overall deficit to EUR10.6 billion, compared with EUR21.8 billion in 2015, in part due to low growth of current expenditure of 0.4% yoy. This mainly stems from the paying off in 2015 by several autonomous communities of spending from the past with new borrowing and a reduction in interest costs in 2016 because of the interest subsidy from liquidity mechanisms. Nevertheless, current spending in 2016 included some exceptional items, such as compensation for the elimination of the 2012 bonus for regional government employees and a 1% salary increase. As we expected once the 2016 budget was announced, current revenue grew by 7.9% yoy in 2016, driven by the high positive revenue settlement from 2014 and also a larger revenue allocation than in the previous year. This resulted in EUR8.1 billion in additional revenues from the central government relative to 2015. The capital expenditure decline also contributed to the improvement of the overall result. Capex was EUR11.8 billion in 2016, down 43% from 2011. Fitch sees this as reflective of an overall effort to comply with stricter deficit targets. Sixteen of the 17 autonomous communities posted an improved current balance in 2016, including 10 with a positive current balance (versus four in 2015). Seven autonomous communities had a negative current margin, although for three of them, the margin was only between -2% and -5%. For the other four, the margin was between -9% and -13%. Catalonia and Valencia, which represent 28% of national GDP, managed a steep improvement, posting current margins of -3.6% and -9.8%, respectively, in 2016 (-21.7% and -26.3% in 2015). As a whole, the autonomous communities did not comply in 2016 with the fiscal deficit target of 0.7% of GDP, but their aggregate deficit was significantly reduced to 0.82% of GDP from 1.66% in 2015. Eleven communities met the target, meaning that just six must present an economic and financial plan for 2017-2018 within one month of notification of non-compliance. The report, Spanish Autonomous Communities: Preliminary 2016 Results, is available on or by clicking the link above. Contact: Julia Carner Analyst +34 93 323 8401 Guilhem Costes Senior Director +34 93 323 8410 Fitch Ratings Espana. S.A.U. Av. Diagonal, 601, Barcelona, 08028 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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