- The delay in the budget cycle affects the AIReF report, which focuses on updating the institution’s forecasts until 2030, assessing the draft budgets of the Autonomous Regions and Local Governments, and monitoring the Medium-Term Fiscal-Structural Plan
- AIReF raises its GDP forecast to 3% and 2.1% for 2025 and 2026, but projects a slowdown in growth in the medium term, to 1.5% in 2030
- It improves its public deficit and debt forecasts for the period as a whole, but maintains that the deficit will resume its upward path in 2026, driven by the ageing population, defence commitments and interest spending
- It updates its growth forecasts for primary expenditure net of revenue measures, the main fiscal supervision variable in the European fiscal framework, and identifies difficulties in complying with the new European rules in the absence of additional measures
- It continues to identify a risk of non-compliance with the national expenditure rule by the Central Government in 2025 and almost all Autonomous Regions in 2025 and 2026
- Despite the improvement in forecasts, uncertainty remains due to the differences between the two expenditure rules currently in force. AIReF therefore recommends that the proposed budgetary stability and debt targets should be consistent with the two rules and ensure compliance with both
The Independent Authority for Fiscal Responsibility (AIReF) today published the Report on the Draft Budget and Main Budgetary Lines of the General Government (GG) required by the Organic Law on Budgetary Stability and Financial Sustainability (LOEPSF), despite the limitations imposed by the delay in the budget cycle, which affects fiscal supervision, the planning capacity of other GG authorities and institutional quality. In the report, AIReF updates its medium-term economic and budgetary forecasts based in a no-policy-change scenario, with an improvement in GDP for 2025 and 2026 and an improvement in the estimate of the public deficit and debt throughout the forecast horizon. AIReF also updates its forecasts for growth in primary expenditure net of revenue measures —the main monitoring variable in the new European fiscal framework — and identifies difficulties in meeting European fiscal commitments.
AIReF points out that neither the General State Budget for 2026 nor the Budgetary Plan have been presented, exceeding the legally established deadlines. Furthermore, the proposed budgetary stability and debt targets, accompanied by the Report on the Situation of the Spanish Economy, which includes the reference rates for the national expenditure rule, have not been presented either. This means that the different GG authorities are at very different stages of the budgetary process in a context of high institutional uncertainty. In this context and given the lack of information, AIReF updates its forecasts in a no-policy-change scenario until 2030 and analyses the main lines of the budgets of the Autonomous Regions (ARs) and Local Governments (LGs).
Macroeconomic scenario
In its macroeconomic scenario, AIReF has improved its growth forecasts to 3% and 2.1% for 2025 and 2026, respectively, and estimates a convergence towards long-term values of 1.7% in 2027, reaching 1.5% in 2030. The improvement in forecasts is due to global growth and trade performance, as well as the carry-over effect of revisions to the National Accounts figures by the National Statistics Institute (INE). Other factors contributing to the improvement include the increase in the immigrant population, robust tourism revenue, lower exposure of Spanish exports to the United States, the contained evolution of energy prices and the rollout of European funds associated with the Recovery, Transformation and Resilience Plan (RTRP).
As of 2026, AIReF projects a gradual slowdown in growth to 1.5% in 2030, as the momentum associated with the RTRP disappears and migration flows moderate. The slower growth in world trade projected by most international institutions also contributes to this profile.
On the price front, AIReF projects a 2.5% increase in the GDP deflator in 2025, which would fall to 2.2% in 2026, subsequently falling to align with the 2% monetary policy reference rate. As a result, nominal GDP growth would rise to 5.6% in 2025 and 4.4% in 2026, to then fall below 4%.
Monitoring of the MTP
AIReF has also updated its forecasts for growth in primary expenditure net of revenue measures – the main variable for monitoring the European fiscal framework. Based on the latest available data, net expenditure growth would have been 4.3% in 2024, up from the previous figure of 3.5%. For 2025, AIReF forecasts growth of 4.6%, above the 3.7% committed to in the MTP, but within the two limits allowed by the control account (annual and cumulative). In 2026, a similar increase is estimated, of 4.6% compared with the 3.5% committed to in the MTP, but compliance with the control account changes: the annual limit (0.3% of GDP) would be exceeded by approximately €1.2bn, but not the cumulative limit (0.6% of GDP). In short, no additional adjustments would be necessary in 2025, while in 2026 the annual limit would be exceeded by a small margin, but not the cumulative limit.
In the medium term, AIReF continues to forecast annual growth of around 4% in 2027 and 2028, both above the commitments made in the MTP and the annual control account. In addition, the limits of the cumulative control account would also be exceeded, requiring additional adjustments.
With regard to the national fiscal framework, AIReF continues to identify a risk of non-compliance with the expenditure rule by the Central Government (CG) in 2025 and most of the ARs in both 2025 and 2026. To comply with the national expenditure rule, additional adjustments of €12bn in 2025 and €2.6bn in 2026 would be necessary. However, the reference rate for 2026 could be modified by the publication of the Report on the Situation of the Spanish Economy that must accompany the proposed budgetary stability and debt targets.
Fiscal scenario
AIReF has revised its 2025 deficit forecast up to 2.5% of GDP, or 2.2% excluding the impact of the DANA. This improvement is reflected across the forecast horizon, with a 2% of GDP deficit in 2026 and a subsequent upward path to 2.5% in 2030. The reduction in 2025 is mainly explained by the gradual withdrawal of measures to combat the price and energy crisis, the impact of revenue measures and the lower impact of one-off operations linked to court rulings. In 2026, lower expenditure associated with the DANA, along with the expected evolution of other revenue and expenditure, will also contribute to this reduction. Subsequently, the deficit will begin to rise, driven mainly by expenditure associated with ageing, the interest burden and defence expenditure.
By sub-sector, AIReF forecasts that the CG will not comply with the national expenditure rule in 2025 and 2027, while the forecast is very close to the reference rate in 2026. Primary expenditure of the sub-sector net of revenue measures will grow by an average of 4.8% per annum between 2025 and 2028 for the purposes of the European expenditure rule. The CG deficit, after an initial improvement in 2025 and 2026, will deteriorate again to 2.6% of GDP in 2029 and 2030.
As regards the Social Security Funds (SSFs), AIReF estimates growth in primary expenditure net of revenue measures of 6.3% in 2025 and 4.4% on average from 2025 to 2028. The SSFs are excluded from the national expenditure rule. In this context, after recording a deficit of 0.5% of GDP in 2025, the sub-sector deficit will stabilise at 0.2% of GDP in 2027.
According to AIReF forecasts, the ARs will not comply with the national expenditure rule between 2025 and 2027. They will show average annual growth of 4.1% in primary expenditure net of revenue measures from 2025 to 2028, for the purposes of the European rule. The sub-sector deficit, after closing 2025 at 0.4% of GDP, will improve in 2026 to reach equilibrium, although it will end the period with a 0.1% of GDP deficit in 2030. For their part, the LGs would not comply with the national expenditure rule in 2025 and 2026 by a narrow margin, but would comply in 2027. With regard to the European expenditure rule, average growth of 3.8% in primary expenditure net of revenue measures is estimated from 2025 to 2030. AIReF also estimates that the LGs will stabilise in the medium term at a surplus of 0.3%.
Debt sustainability
In the medium term, AIReF forecasts, in its baseline projection, a reduction in the public debt-to-GDP ratio of 6.4 points between 2024 and 2030, to around 95.2% at the end of the period. This downward path is based on stable nominal growth of around 3.5%, an average primary surplus of 0.5% of GDP and interest payments of around 2.7%, thus maintaining a favourable difference between growth and interest rates that underpins the gradual debt reduction.
Compared with the previous AIReF projection, the debt ratio for 2029 is revised downwards by 3.2 points, due to a greater contribution from nominal growth, a more favourable primary balance, better evolution of the interest burden and a statistical revision of GDP.
Recommendations
Although the fiscal and economic situation has improved compared with previous reports, AIReF argues that uncertainty stemming from the lack of definition in the national fiscal framework persists, as the national and European expenditure rules differ in several respects. In the current context, compliance with the national expenditure rule leads to compliance with the European expenditure rule in 2025 and, as noted above, in fact requires additional adjustments. However, this situation is reversed in 2026, when compliance with the rate committed to in the MTP would require greater adjustments than those needed for the national expenditure rule.
To avoid situations such as the one described above, and until the Stability Law is adapted to the new European framework, AIReF recommends that the proposed budgetary stability and debt targets for each GG authority should be consistent with the two expenditure rules and ensure compliance with both. Such consistency is currently required by the Stability Law, which establishes that the setting of targets must take into account both the national expenditure rule and the EU recommendations.
