The president of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, took part today in the Ibercaja Conference organised by the Official Chamber of Commerce, Industry and Services of Burgos, where she reviewed Spain’s economic and fiscal outlook and called for a comprehensive, wide-ranging strategy focused on growth and the sustainability of the public finances.
The President explained that both the current context and the medium and long-term outlook demonstrate the relevance of this strategy, in an increasingly complex environment where sources of risk are multiplying and Europe and Spain are experiencing a period of institutional weakness.
Cristina Herrero underlined the Spanish economy’s relatively strong performance compared with its European partners, thanks to immigration, the boost from tourism and other factors such as the smaller impact of the tariff war and lower energy costs. However, the President recalled AIReF’s outlook, which currently points to a medium term slowdown, from the 2.9% growth rate forecast by AIReF for 2025 to rates of around 1.5% by the end of this decade.
On the fiscal front, the forecasts, heavily shaped by domestic factors such as the lack of approved budgets, point to a public deficit below 3% of GDP through to 2030, but with the consolidation process running out of steam and a turning point in 2027, when the deficit will return to an upward trajectory. This trajectory will imply a moderation in the pace of public debt reduction, which will continue to fall towards 95% of GDP by 2030, but at an increasingly slower pace.
Long-term forecasts
In the longer term, Cristina Herrero recalled that AIReF’s forecasts point to even more moderate growth (1.3%) and one that depends heavily on productivity dynamism rather than on the labour factor, which has been the main driver of growth in Spain. The expected decline in the working-age population caused by population ageing limits the contribution of labour and requires a boost in productivity to support growth. This, according to Cristina Herrero, is one of the great challenges of economic policy.
She identified several factors that may affect productivity trends, including process automation, the training and skills of immigrants, employment stability and temporary disability processes. She also recalled that AIReF published a study last week on this benefit, as part of the second phase of the Spending Review 2022–2026, which identified a structural shortcoming in the management of temporary disability in a context of a sharp increase in common contingencies driven by multiple factors. To improve the efficiency of this key component of the welfare system, AIReF proposes strengthening supervision and coordination.
Ensuring sustainability
On the fiscal side, the long-term challenge is to ensure the sustainability of public finances, which is necessary for growth itself and to reduce public debt. Under unchanged policies, AIReF’s projections point to a rising public expenditure to GDP ratio that is more dynamic than the revenue to GDP ratio, shaped by several factors such as ageing, defence spending commitments, those linked to climate change and economic growth itself.
In this context, Cristina Herrero highlighted the value of the reform of the Stability and Growth Pact carried out in 2024, which adopts a renewed vision of fiscal policy, promoting sustainability in a way that is compatible with economic growth. It allows for differentiated national fiscal strategies to reduce debt, provides for extensions to adjustment periods if investment or reforms aimed at strengthening growth are adopted, and strengthens the stabilisation capacity of fiscal policy in exceptional circumstances, among other things.
A comprehensive fiscal framework
With this new European framework as the backdrop, Cristina Herrero stressed the importance of Spain’s medium term strategy being built on two key pillars: productivity gains, and budgetary discipline and the quality of the public finances. In this regard, she underlined the importance of having a comprehensive national fiscal framework that helps to promote sustainability without neglecting growth. “Fiscal policy cannot be a source of additional uncertainty”, she said, recalling the proposals made by AIReF last November when it presented its opinion on the reform of the national fiscal framework.
Finally, she pointed out the relevance of policy evaluation for fiscal sustainability, as it allows prioritisation between different policies and options, helps informed decision-making and improves efficiency if incorporated into the budget process. Specifically, she highlighted AIReF’s evaluations, stressing that next week it will present the latest studies commissioned by the central government as part of the Spending Review (temporary disability, development aid and minimum living income), and reminded the audience that AIReF has received other commissions from the central government outside the Spending Review, as well as from 10 autonomous communities.
