The Independent Authority for Fiscal Responsibility, AIReF, has updated its 2024 growth projection, trimming the rate by 0.3 percentage points to 1.7 percent. The new outlook still signals a smaller deficit in line with the government’s objective, provided anti-inflation measures are scaled back. AIReF stresses that the path depends more on policy decisions than on raw economic forces, with inflation containment playing a central role in shaping the deficit trajectory and in sustaining fiscal credibility for both investors and citizens alike. [AIReF briefing]
AIReF estimates the public deficit at around 4.1 percent of GDP for 2023. The government’s budget plan sits slightly above AIReF’s estimate by about two-tenths, and the institution believes it could shave 1.1 percentage points off the 2024 deficit if energy and price relief programs are not expanded and if regional governments maintain restrained spending growth. In the near term, outcomes will hinge on how revenue measures balance with controlled spending and on how quickly consolidation reforms are implemented across regions and sectors to avoid abrupt demand shocks. [AIReF briefing]
During a briefing alongside the budget plan, the AIReF president noted that anti-inflation measures contribute roughly one percentage point of GDP in 2023, about 15 billion euros. By 2024, the impact is expected to fall to around one tenth of GDP as energy relief programs wind down, while continued support for urban public transportation was identified as a policy area to be maintained. These dynamics feed into the broader forecast for the government’s medium-term fiscal strategy, showing how targeted relief can be gradually withdrawn without harming growth or social protection, and how revenue reforms could offset subsidy withdrawals. [AIReF briefing]
AIReF considers a 3 percent open deficit target for the following year achievable through a combination of higher revenue and, while keeping spending calibrated, more expenditure aligned with the executive’s plan. The agency points to structural factors and policy choices as drivers of the divergence between the proposed and projected paths for the public balance, including the need to improve tax compliance, broaden the tax base, and optimize public investments for productivity gains. [AIReF briefing]
The institution outlines several scenarios. Revenue is expected to rise by about 6.5 percent in 2024, reaching roughly 42.7 percent of GDP. Meanwhile, expenses would grow by around 4 percent, equating to about 45.7 percent of GDP. These movements reflect the withdrawal or tapering of measures such as VAT reductions on certain foods and relief on electricity and gas bills. In practical terms, AIReF estimates this could translate to roughly 5.7 billion euros more in revenue and about 8.0 billion euros less in spending due to policy adjustments, with additional room for efficiency savings in public services and procurement reforms that could elevate the quality of public goods without widening deficits. [AIReF briefing]
AIReF also maps the debt path: debt would peak at around 106.3 percent of GDP in 2024, with a reduction of about 5.3 percentage points from the previous projection. Spain remains among the euro area’s higher debt ratios, alongside Greece and Italy, and has connections in scale to Portugal and France. The institution stresses that maintaining investor confidence will require transparent reporting, credible medium-term plans, and a dependable stabilization mechanism should external shocks hit the economy. [AIReF briefing]
Reiterating the need for a plan with a clear medium-term public finances orientation, AIReF emphasizes that under a scenario with fixed policies the deficit could rise to about 3.2 percent of GDP in 2025 and stay at that level through 2028. The pursuit of a sustainable path continues to be shaped by policy choices, macroeconomic conditions, and the effectiveness of stabilization measures, including automatic stabilizers that respond to cyclical downturns without destabilizing debt dynamics. [AIReF briefing]
Negative risks AIReF supported the budget plan’s growth forecast of 2 percent for 2024 but warned about downside risks. Ongoing inflation pressures and geopolitical tensions threaten the outlook. The agency also flagged uncertainties tied to financing conditions, household and business confidence, and the strength of domestic demand. In particular, private consumption and housing investment could slow if confidence wanes and financing tightens further. The recovery plan’s impact was revised downward, potentially shaving about 1.1 percentage points of GDP in 2023 and around 1.9 percentage points in 2024, should tailwinds fade or if external demand weakens unexpectedly. [AIReF briefing]
For 2023 the forecast points to 2.3 percent growth, with a softer performance anticipated in the second half of the year. That softer trajectory could weigh on the following year, even as AIReF sees some positive quarterly momentum with small gains projected for the third and fourth quarters. The agency stresses that the path ahead depends on the interaction of demand components, policy settings, and external developments, including energy prices, trade conditions, and technological investment that can alter productivity and growth dynamics in the medium term. [AIReF briefing]