Pandemic families increase wealth companies accumulate debt - Families increase their wealth by 8.6% until March, while companies accumulate 56,800 million more debt than last year.

In the 12 months since the start of the coronavirus pandemic, the financial situation of companies and families has followed a completely different path, despite the fact that the consequences of the crisis have affected different sectors of society and the productive fabric in a very different way. Thus, average savings have increased in households, albeit unevenly, while companies have relied more on stimulus and credit measures.

Now, with the first data of the 12 months since the outbreak of the pandemic, the disparity between businesses and households remains. This is reflected in the Financial Accounts of the Spanish Economy for the first quarter just published by the Banco de España, which show that, although the debt of companies and households grew by 3.1% year-on-year between March last year and the same month of this year, most of the increase in debt corresponds to companies.

Pandemic families increase wealth companies accumulate debt

In particular, the consolidated debt of companies and households reached the ratio of 1.66 billion euros in march of this year, which is 3.1% more than in the same month of the previous year, and elevates the weight to a ratio of 149,3% in relation to GDP, which translates into 19 percentage points more than 12 months ago, a phenomenon that the Bank of Spain, attributed both to the increase of the debt at about 50,000 million euros as the decline of the GDP.

"The increase of the debt aggregate of firms and households is the result of a behavior disparate of these 2 sectors," notes the study, which reveals that the debt of non-financial corporations increased by 6,29%, from 906.000 million euros to 963.000 million in 12 months, while the families fell by 0.99% to the wane of the spreads over 705,000 billion euros reached in march 2020 to the 698.000 million last march.

Pandemic families increase wealth companies accumulate debt

This also implies an increase in the weight of corporate debt in relation to the size of the economy, which the Banco de España figures at 86.6%, although specifying that it would reach 109.7% if the debt between companies was taken into account in this calculation, while the liabilities of households and non-profit entities stand at a ratio to Spanish GDP of 62.8%, as reflected in the following graph.

This increase in debt is also explained by financing operations during the last 12 months, which involved new debt equivalent to 4.5% of GDP, although the Bank of Spain explains that, in net terms, non-financial companies raised financing equivalent to 4.7% of GDP, while households cancelled debt equivalent to 0.3% of the total size of the Spanish economy.

Pandemic families increase wealth companies accumulate debt

Similarly, the study ensures that the financial assets of households have increased by 5.4% since March 2020, reaching a total of 2.38 trillion euros, which represents 214.7% of GDP. The Banco de España estimates that the increase is due to the net acquisition of financial assets valued at about 83,000 million euros and the revaluation of these assets by 39,100 million euros.

Of those nearly 2.4 trillion euros, the 42% is in cash and deposits, 24% in equity capital, whose weight has been reduced by almost 3 points between march 2020 and the same month this year, a 16 per cent in insurance and pension funds and the remaining 15% in units in investment funds, which are the assets most weight gained in the last 12 months in Spanish households, a rise of almost 2%.

Pandemic families increase wealth companies accumulate debt

The increase in financial assets and the decline in household debt means that the net financial wealth of households has grown by 8.6% in the 12 months after the outbreak of the pandemic, to 1.63 trillion euros, equivalent to 147% of GDP, more than 25 percentage points more than in March 2020 due to the increase in financial assets and the fall in GDP.

Pandemic families increase wealth companies accumulate debt

More news:

Tax collection has already recovered from the pandemic: state tax revenues exceed 2019 figures by 3.5%

In recent months, several macroeconomic indicators have begun to signal the start of recovery from the coronavirus crisis. The increase in Social Security affiliation, the reduction of those affected by ERTE, the return to positive confidence and business activity indices in the industrial and service sectors or the increase in card spending by consumers are good examples of this.

However, the return to pre-coronavirus figures is also occurring in the State coffers, as reflected in the latest tax revenue figures, corresponding to May, which shows that tax collection in the first 5 months of the year has reached 81,583 million euros, 3.5% more than in 2019, which translates into 2,770 million more for public coffers than in the year before the pandemic, according to The Economist.

In addition, tax figures until May are also above those reached 12 months before, when the country was mired in the first wave of the coronavirus and with mobility and economic activity restricted in the face of the state of alarm. Now, on the other hand, taxpayers are contributing more to the public coffers than before the pandemic, according to the economic newspaper, which ensures that this phenomenon anticipates strong economic growth for the rest of the year.

In fact, the 81,583 million euros collected in the first 5 months of 2021 represent the best start of the year for tax revenues to the state coffers in the last decade, according to figures from the Ministry of Finance, which indicate that in 2011 70,100 million euros were collected. Between January and March, while in 2019 the previous maximum collection was reached, with 78,770 million euros.

In contrast, in 2020, the impact of the coronavirus reduced the tax revenues to the beginning of the year until 71.700 million euros, nearly 10,000 million less than in 2021, although this figure is well above the total amount raised between January and march 2012 to 2016, when the Spanish economy was trying to recover from the recession that began in 2007, and the bursting of the housing bubble and the banking crisis that occurred just after.

In addition, the recovery in tax collection at the beginning of 2021 breaks the downward trend in tax collection that the public coffers had been suffering since long before the pandemic, with a constant decline in tax revenues since 2007, at the beginning of the previous crisis, especially due to the lower collection of corporate tax that has offset the increases in income tax or VAT.

These figures coincide with the postponement until 2023 of most of the tax reform promised to Brussels in the Recovery Plan in exchange for European funds, while the tax measures put in place in the 2021 Budgets, such as the reduction to 95% of capital gains and dividends exemptions from foreign subsidiaries in corporate tax have barely met their collection targets.