Spain | Fiscal Watch. November 2025

Summary

Public deficit is expected to decline to 2.6% of GDP in 2025 and 2.2% in 2026, driven by the cyclical improvement in activity, the lower impact of DANA-related expenses, and the normalization of tax rates. Reaching 2026 forecast will be require new measures of around 0.4 percentage points of GDP to comply with fiscal rules.

Key points

• Key points:
• Fiscal consolidation is already accelerating, supported by robust revenue growth and tighter expenditure control. As a result, the twelve-month cumulative deficit, excluding DANA-related spending, had fallen to 2.5% of GDP by August 2025.
• DANA-related aid has shown signs of deceleration, amounting to 0.4 pp of GDP through August, which indicates that the bulk of the impact was concentrated in the first half of 2025. Meanwhile, defense spending has picked up, particularly in military personnel compensation and special modernization programs.
• The projections point to an average growth in primary expenditure, net of revenue measures, of around 3.4% over 2025–2030, slightly above the 3% commitment set out in the Structural Fiscal Plan.
• Compliance with fiscal rules would support a gradual reduction in public debt, reaching 99.5% of GDP by 2026.
• Execution of grants and public tenders under the Recovery, Transformation and Resilience Plan has reached 72% of planned investment. To achieve full implementation by August 2026, the pace would need to accelerate by 60%.

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