- The Independent Authority for Fiscal Responsibility (AIReF) lowers its 2026 growth forecast by one tenth of a percentage point to 2.3% and raises its inflation forecast by 1.2 points
- It highlights Spain’s relatively favourable position in the international context owing to its lower dependence on Middle Eastern energy and domestic factors sustaining growth
- AIReF raises its public deficit forecast by six tenths of a percentage point to 2.6% of GDP in 2026 as a result of extraordinary measures, and expects a more moderate reduction in public debt
- It forecasts non-compliance with the net expenditure commitment set out in the MTP, exceeding both the annual and cumulative limits of the control account in 2026
- It warns of a risk of non-compliance with the national expenditure rule in Central Government, the Autonomous Regions and some local corporations
- It estimates that compliance with the national expenditure rule would require the adoption of measures amounting to six tenths of GDP. At European level, this adjustment would reduce the deviation to below the cumulative limit of the control account, though it would remain above the annual limit
- AIReF recommends strengthening compliance with fiscal rules and improving coordination mechanisms and fiscal transparency
The Independent Authority for Fiscal Responsibility (AIReF) today published its report on the 2026 initial General Government budgets, in which it revises its macroeconomic and fiscal forecasts and identifies a risk of non-compliance with national and European expenditure rules in 2026 amid high uncertainty. Specifically, AIReF revises expected growth in 2026 downwards by one tenth of a percentage point to 2.3% and raises the public deficit forecast for the year as a whole by six tenths of a percentage point to 2.6% of GDP. In this context, AIReF foresees a risk of non-compliance with both the national and European expenditure rules as early as 2026.
In the report, AIReF notes that the Draft General State Budget for 2026 has not been presented, nor have the budgetary stability and public debt targets been approved. However, the publication of the report on the situation of the Spanish economy has resulted in an update of the reference rate for the national expenditure rule to 3.5% for 2026. At regional level, nine Autonomous Regions have approved their budgets and eight have rolled them over, although the Region of Murcia has recently requested prior endorsement from AIReF ahead of the presentation of its draft budget.
Macroeconomic forecasts
Amid high geopolitical and economic uncertainty, AIReF presents a new macroeconomic scenario placing the real GDP growth forecast for 2026 at 2.3%, while nominal growth—particularly relevant for fiscal forecasts—remains at 4.5%. However, AIReF notes that the crisis in the Middle East introduces significant downside risks to this scenario.
According to the institution, Spain faces the consequences of this conflict from a more favourable position than in the past owing to its lower dependence on Middle Eastern energy. To date, the main effects have been channelled through rising oil and gas prices on global markets rather than through the supply constraints experienced by other countries with greater exposure. In this context, AIReF estimates that growth could fall by 0.2 percentage points as a result of rising energy prices. The tax cuts, subsidies and transfers implemented will partially offset this effect, with an impact of 0.14 points on the 2026 average.
In addition to limited direct exposure to the Middle East, AIReF points to domestic factors that will help sustain growth, such as the inflow of migration, labour market performance, the rollout of investment projects financed through the Next Generation EU mechanism, high household savings rates and a sounder financial position of households and firms.
On the price front, inflation as measured by the CPI is revised upwards to 3.2% in 2026 (1.2 points higher than in January). The effects of the measures implemented in response to the war are virtually negligible on the annual average, as these are temporary measures. Growth in the GDP deflator, which excludes import prices, would stand at 2.2% in 2026, while nominal economic growth reaches 4.5%.
Fiscal rules
As regards compliance with European commitments, AIReF forecasts that the growth in primary expenditure net of revenue measures—the new key variable in the European fiscal framework—will exceed the commitment undertaken and the annual and cumulative limits of the control account in 2026. This account allows annual deviations of up to three tenths of GDP and cumulative deviations of up to six tenths of GDP. In 2026, AIReF estimates net expenditure growth of 5.9%, compared with the 3.5% committed in the Medium-Term Fiscal-Structural Plan (MTP), representing a deviation of one point of GDP and thereby exceeding the annual limit of the control account.
To assess the cumulative effect, the 2024 and 2025 data must be taken into account. In 2024, expenditure net of revenue measures fell below the commitment (4.2% compared with 5.3%), generating a positive margin in the control account. In 2025, pending the publication of the final figure, AIReF estimates that net expenditure stood at 4.8%, above the commitment (3.7%). Taking both fiscal years and 2026 into account, in cumulative terms net expenditure growth over the period would be 15.9%, compared with the 13% committed in the MTP. This would imply a deviation of one point of GDP, thereby also exceeding the cumulative limit permitted under European regulations (six tenths).
However, it should be noted that Spain has not requested the activation of the national escape clause to accommodate the increase in defence spending. According to AIReF’s defence spending forecasts for 2026, its activation would provide a margin of just over two tenths of GDP.
As regards the national expenditure rule, AIReF continues to identify a risk of non-compliance in 2026 in Central Government, in almost all Autonomous Regions and in some of the large local corporations analysed, although it expects the local government subsector as a whole to comply with the rule. Compliance with the national expenditure rule would require the adoption of measures amounting to six tenths of GDP. In terms of the European expenditure rule, these measures would reduce net expenditure growth to 4.4% in 2026 and to 14.2% in cumulative terms, still above the commitment in both cases under the MTP. Nevertheless, the deviation would fall below the cumulative limit of the control account, although it would still exceed the annual limit.
Fiscal forecasts
AIReF places the General Government deficit forecast at 2.6% of GDP in 2026, following 2.4% of GDP in 2025. This estimate represents an increase of six tenths of GDP compared with the previous report, attributable to the adoption of measures to mitigate the effects of the storms in Andalusia and Extremadura and measures in response to the crisis in the Middle East. These measures have an estimated cost of six tenths of GDP. In addition, other revenue measures, principally in corporate income tax and personal income tax, result in a further increase in the deficit compared with 2025 of two tenths of GDP. Conversely, the trend in remaining revenue and expenditure contributes a deficit reduction of four tenths of GDP, and lower spending associated with Storm DANA a further one tenth.
AIReF undertakes the exercise of estimating the level at which the deficit would stand if the fiscal rules in force were met. If the national expenditure rule were complied with across all subsectors, the public deficit in 2026 would fall to 2% of GDP. Moreover, taking into account AIReF’s revenue forecast, compliance with the MTP commitment on primary expenditure net of revenue measures of 3.5% in 2026 would entail a further deficit reduction of nine tenths, to 1.7% of GDP in 2026.
Subsectors
By subsector, AIReF estimates that Central Government eligible expenditure for the purposes of the national expenditure rule will grow by 7.3% in 2026 excluding the DANA and storm-related measures, almost four points above the 3.5% reference rate. For the purposes of the European expenditure rule, Central Government would record an increase in primary expenditure net of revenue measures of 10.7%, above the 3.5% set out in the MTP. In terms of the deficit, AIReF places the Central Government balance at -2.4% of GDP in 2026, five tenths higher than in the previous forecast. The estimated deficit for the Social Security Funds improves by almost one tenth, to 0.2% of GDP.
At regional level, AIReF continues to identify a risk of non-compliance with the expenditure rule in the Autonomous Regions in 2026, with eligible expenditure growth of 4.9%. With the exception of La Rioja, all would exceed the reference rate. This risk would materialise following widespread non-compliance in 2024 and 2025, despite the fact that all Autonomous Regions except Andalusia have an Economic-Financial Plan approved or endorsed by AIReF. In addition, for the purposes of the European expenditure rule, primary expenditure net of revenue measures will grow by 3.7%, above the MTP commitment, while the subsector deficit will stand at 0.1% of GDP, in balance when the impact of natural disasters is excluded.
For local corporations, AIReF forecasts eligible expenditure growth of 2%, below the national reference rate of 3.5% and lower than estimated in the previous report. For the purposes of the European expenditure rule, primary expenditure net of revenue measures will grow by 3.1%, slightly below the MTP reference. Local corporations will close 2026 with a surplus of 0.2% of GDP, similar to the previous forecast.
Public debt outlook
Public debt stood at 100.7% of GDP in 2025, a reduction of 1 percentage point over the past year and of 23.4 points from the peak reached in the first quarter of 2021. Despite this, the ratio remains 3 percentage points above its pre-pandemic level. In absolute terms, debt amounted to EUR 1.698 trillion, with year-on-year growth of 4.8%.
Looking ahead to 2026, AIReF expects the downward path of the debt ratio to continue, albeit at a more moderate pace, to 99.9% of GDP, a reduction of 0.8 percentage points. This trend reflects a smaller contribution from economic growth and a higher public deficit. Over the medium term, the ratio is expected to continue declining, though at a more gradual pace.
Recommendations
In view of the above, AIReF recommends that the Ministry of Finance establish the coordination mechanisms needed to ensure compliance with the European expenditure rule by General Government as a whole. It also recommends that the Ministry of Finance, the Autonomous Regions and local corporations where a risk of non-compliance with the national expenditure rule has been identified adopt the measures necessary to ensure compliance. It further recommends that the supervisory bodies of the local corporations concerned monitor budget execution to detect situations incompatible with compliance with the expenditure rule and/or budgetary stability.
On transparency, AIReF reiterates its recommendation to the Ministry of Finance to publish monthly figures on primary expenditure net of revenue measures for the purposes of the European expenditure rule and to resume monthly publication of eligible expenditure under the national expenditure rule. Finally, AIReF once again recommends the signing of an agreement with the Ministry of Finance for the provision of the information necessary for the preparation of its reports.
