Budget deficit narrows as belt-tightening takes effect

The deficit of the Spanish central government declined in the first half of the year as a result of the government's austerity measures.

The Economy Ministry said Thursday the shortfall in the central administration's books narrowed 18.9 percent, or 5.637 billion euros less, in the first six months of the year to 24.132 billion euros, equivalent to 2.21 percent of GDP. Revenues in the period came in at 49.406 billion euros, while outlays amounted to 73.538 billion euros.

The Economy Ministry said the figures incorporate the new model for regional financing, which will have an impact on both revenues and spending for the rest of the year. Under the new agreement, transfers to the regions are set to fall, while their share of national revenues will increase.

The government is aiming to trim the budget deficit to 6 percent of GDP this year from 9.2 percent last year through spending cuts and increased taxes.

The secretary of state for finance, Juan Manuel López Carbajo, said the first half figures have put the government in line to meet its target for this year.

Personal income tax receipts in the first half rose 6.5 percent, while corporate tax revenues declined 15.6 percent due to a drop in company profits. Value-added tax receipts rose 9.4 percent, reflecting the increase in rates introduced as part of the austerity measures in July of last year.