Spain | Fiscal Watch. March 2025

Summary

The deficit is estimated to have stood at 3.3% of GDP at the end of 2024, and is projected to decline to 2.7% in 2025 and 2.4% in 2026. Compliance with fiscal rules would entail a slightly tighter fiscal stance over the 2025–2026 period.

Key points

• Key points:
• The expected adjustment in 2024 is largely driven by stronger economic activity and the gradual phase-out of anti-inflation measures. Excluding the DANA-related support measures (0.3 pp of GDP), the deficit would have been close to the 3% of GDP.
• This forecasts point to average growth in net primary expenditure (excluding revenue measures) of around 3.2%, supporting compliance with the agreed fiscal rules, which allow for average expenditure growth of 3% between 2025 and 2031.
• Uncertainty around fiscal policy is increasing, in a context of demanding fiscal adjustments and growing spending needs related to ageing, investment, and defense. The lack of political consensus hampers the adoption of necessary measures.
• Regional governments are estimated to have run a deficit of around 0.3% of GDP in 2024, driven by strong revenue growth that more than offset the increase in spending.

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