The Independent Authority for Fiscal Responsibility (AIReF) has slightly raised its growth projections for the Gross Domestic Product (GDP) of Spain for 2026 and 2027, to 2.6% and 2.2%, respectively, but at the same time has warned of a deterioration in the public deficit scenario and the failure to comply with the fiscal plan committed to the European Union.
The independent body headed by Inés Olóndriz has made public this Wednesday the report on the projects and the basic lines of the Budgets of the Public Administrations for 2027, a document in which it updates its macroeconomic framework and its fiscal forecasts.
The chairwoman of the AIReF has acknowledged in a press conference that the lack of a General State Budgets project and of a draft Budget Plan again narrows the scope and precision of its analysis.
In a scenario of constant policies, the AIReF expects that deviations in net primary expenditure from revenue-raising measures will exceed the margins of the new fiscal framework agreed with Brussels from 2026 and throughout the entire period of application of the Plan, even applying the maximum flexibility provided.
In detail, the body calculates average growth in net primary expenditure of 5.7% between 2026 and 2028, clearly above the 3.2% committed by the Government to the European Union. For the AIReF, these differences will require adopting additional measures if the European commitments are to be respected.
On the macroeconomic front, the improvement in the AIReF’s expectations for GDP in 2026 and 2027, to 2.6% and 2.2%, respectively, is explained above all by the better performance of activity in the second quarter of 2026 and by the carryover effect on 2027. In any case, the institution projects a gradual slowdown in growth in the medium term, to 1.7% in 2031.
In addition, the body expects inflation to rise by 3.6% in 2026 and 3% in 2027, which represents three and six tenths more, respectively, than in its previous scenario.
In the area of public accounts, the AIReF has raised its deficit forecast to 2.8% of GDP in 2026 due to the impact of the new energy measures adopted to mitigate the consequences of the conflict in the Middle East. For 2027, it estimates that the deficit will fall to 2.6% with the withdrawal of these temporary actions.
However, the institution underlines that this correction will be conditioned by the increase in structural spending. Under the assumption of constant policies, the deficit would return to 2.8% of GDP in 2028 and would continue to rise to 3% in 2031, driven by the higher cost associated with population ageing, the interest on the debt, and the commitments in defense matters.
Public revenues, without considering the Recovery, Transformation and Resilience Plan (PRTR), would rise from 42.4% of GDP in 2026 to 43.3% in 2031, supported mainly by the collection of the IRPF and social security contributions. In parallel, total spending would increase from 45.2% to 46.4% of GDP over that same period, pressured by demographic ageing, defense obligations, and the increase in the cost of debt, whose interest spending would reach 3.2% of GDP in 2031.
Behavior by subsectors and tone of fiscal policy
By subsectors, the AIReF expects that all of them, except Local Corporations (CCLL), will show between 2026 and 2028 an average growth in net primary spending on income-measure revenues above the target set in the PFEMP. The Central Administration leads the increase, with an average rate of 8.3%, followed by the Autonomous Communities (CCAA), with 5.2%, and the Social Security Funds, with 4.8%, while the CCLL would be at 3.2%.
As for the balance, the bulk of the public deficit will be concentrated in the Central Administration, which would reach 3.3% of GDP in 2031. The Social Security Funds would maintain a stable deficit of around 0.1% of GDP, the CCAA would move close to balance, though with disparities between regions, and the CCLL would preserve a surplus close to 0.3% of GDP.
In 2026, fiscal policy would adopt an expansionary bias equivalent to 1.3 percentage points of GDP, in a context in which the economy will operate above its potential level, setting a procyclical tone contrary to that established by the Government in the PFEMP. In addition, the adjusted public balance for the cycle and for specific measures would remain around -3% of GDP, with deterioration in 2026.
Public debt and risks to sustainability
The AIReF projects that the ratio of public debt will continue on a downward path until it reaches 95.4% of GDP in 2031, supported by the positive contribution of the economy’s nominal growth. However, it warns that this momentum will gradually lose strength as the weight of interest increases in an environment of more demanding financing conditions.
The planned trajectory has been slightly revised upward compared with the May report, and sensitivity analyses indicate that a less favorable pattern of growth or the primary balance could end up slowing the reduction in debt.
AIReF recommendations to the Ministry of Finance and to regional administrations
In view of the lack of a draft of the General State Budgets and of a draft Budgetary Plan, the AIReF urges the Ministry of Finance to set in motion the work needed to design a medium-term fiscal strategy that includes the necessary measures to achieve a path of net expenditure growth compatible with the commitments made with the European Union.
At the same time, it recommends that the Ministry of Finance, the CCAA and the CCLL with a risk of deviation avoid approving new decisions that involve structural increases in net primary expenditure. This affects both permanent reductions in revenues and increases in spending that do not have assured structural financing.
The institution emphasizes that respect for the fiscal rules should serve to strengthen the sustainability of public accounts and reduce the vulnerability derived from maintaining a volume of debt close to 100% of GDP, especially in a context of higher interest rates and more demanding financing.