Spanish fiscal policy in the face of systematic budget rollover: Risks for stability and reform
Fiscal policy
Fecha: mayo 2025
Santiago Lago Peñas
SEFO, Spanish and International Economic & Financial Outlook, V. 14 N.º3 (May 2025)
Spain’s fiscal performance in 2024 benefited from strong economic growth and buoyant revenues, helping to reduce the headline deficit to 2.8% of GDP. However, this improvement largely reflected cyclical dynamics, with the structural deficit decreasing only slightly to remain above 3%. Budget planning for 2025 has been clouded by political uncertainty, resulting in a sharp divergence in medium-term consolidation scenarios between the government and independent institutions. At the subcentral level, regional governments posted near-balanced budgets thanks to sharp growth in tax collections and the national strategy of sheltering them during the pandemic years, while local governments registered a surplus, supported by relatively flat spending. Looking ahead, demographic change, climate-related spending, defence requirements, and external shocks are expected to add further strain. In this context, fiscal sustainability will depend on rebuilding consensus, strengthening institutions, and adapting Spain’s budgetary framework to emerging risks and long-term demands.