The Spanish government has put through a huge extension of its budget framework for the coming year. This move has been noted to represent the growing optimism with regard to the future of the Spanish economy. The extension has been carried out despite outstanding GDP growth that has beaten the other European nations since 2019. Spain’s Finance Minister, María Jesús Montero, stated that the extension was meant to create ‘expansionary and responsible budgets.’
A strong economy fuels the growth of the budget
The economy of Spain has remained relatively strong, posting a cumulative growth of 10% since the fourth quarter of 2019, performing better than other European countries. According to an estimate by the OECD, the growth of the country’s GDP will remain relatively strong, decelerating to 2.9% in 2025 from 2.2% in 2026 and then to 1.8% in 2027. The growth of the consumer price index will decelerate to 2.3% in 2026 and 1.8% in 2027 from 2.6% in 2025.
The government has also revised its projection for GDP in 2025 to grow by 2.9%, which means it has improved its previous projection in September by two-tenths of a percentage point. Economy Minister, Carlos Cuerpo, has shown that “Spain is still a country with strong economic growth, which means more income for its citizens with a reduced level of inequality.”
Also emerged is the new indicator for the development of inequality indices named S80/20. The Treasury forecasts from the government reveal that taxation is expected to experience an enormous increase of over 325 billion euros in 2025 and is expected to grow by 8.5% in 2026 due to the positive trends in the economy. There is expected to be significant growth in the revenue that can be attributed in part to the performance of the Spanish economy and the effect of taxes imposed on the economy.
Record spending ceiling highlights spire’s tax-oriented investments
A spending limit of 212.026 billion euros has been set by the Council of Ministers, which breaks yet another record. When increasing the total amount of recovery funds for COVID-19 that must be allocated by 2026, it further grows with an increased spending limit of 216.177 billion euros. There has been an 8.5% escalation in the spending limit from 2025, with an initial spending limit of 195.353 billion euros, but it was never met due to certain political issues.
Finance Minister Montero added that the allocation of expenditure “has the DNA of a progressive government and will make it easier to integrate our social programs such as health services, education services, and scholarship services. Priorities of the budget include, among others, the increase in pensions based on the average inflation target for 2025, the compensation of the personnel in the government, as well as support for enhanced military expenditure to meet the NATO target of 2% of the GDP by 2025.
“Accelerating the pace of fiscal consolidation would help to build buffers to absorb potential future shocks, including addressing pressures related to growing pension costs and maximizing tax revenues,” OECD Secretary-General Mathias Cormann said.
Budget approval faces political challenges
Nonetheless, in spite of their aggressive spending plans, this budget will face parliamentary difficulties considering their deteriorating relations with the larger parties in the coalition, especially Junts. The Treasury plans to publish its draft budget of 2026 in the first quarter of the year, when the cancellation of the regions’ debts will also take place. The approval of their budget looks rather difficult in their current political positions, considering their stance on the deficit in the People’s Party’s spending plans.
Spain’s expansionary budget policy illustrates its optimism regarding its economy and budget priorities. Setting a record-breaking expenditure level of 212 billion euros, it’s crystal clear that this administration will continue to incur high levels of expenditure despite addressing the diverse needs of society. The test will come during the parliamentary process of budget approval.
