Growth underpins public revenuePublic expenditure excluding interest payments is set to rise slightly to around 42.9% of GDP through to 2032. At the same time, revenue is expected to grow, supported by a strong labour market, resilient consumption and effective tax collection.
The lack of a parliamentary majority has restricted room for manoeuvre on the spending front. The 2023 budget has been deferred to the 2024–2026 period, leading to a reduction in discretionary spending. The rise in defence spending remains contained as Spain has secured an exemption from NATO’s 5% target; it is maintained at 2.1% of GDP, a level reached in 2025. However, these constraints will be eased if the higher spending ceiling, provided for in the 2027 budget, is implemented.
Debt reduction driven by growthStrong growth, combined with a favourable trend in the primary balance, is facilitating a continuous reduction in public debt throughout the forecast period. However, this decline is expected to slow from 2027 onwards.
From 2029 onwards, real interest rates are expected to become a drag. Despite higher financing costs,
the primary balance will remain positive and continue to support debt reduction.
