Spanish Autonomous Communities in 2025: Overall Still Improving Debt Outlook

Thanks to the resilience of the Spanish economy in the high interest rate environment and the positive effect of the regional financing system, the regional sector's fiscal results notably improved in 2024. The regional Spanish sector has continued to reduce its debt burden. The improved fiscal situation offers the regional sector some fiscal room to withstand weaker economic prospects in 2025. We believe that the regions' fiscal performance could slightly deteriorate. The key challenge will be control of expenditure in line with the medium-term fiscal-structural plan in order for the debt burden to keep decreasing overall. Additionally, commitments from the national government could accelerate debt reduction.

Key Highlights include:

-- The Implementation of Political Commitments by the National Government Could Strengthen Regional Debt Metrics.
-- Current Fiscal Room and the Medium-Term Fiscal Plan Should Drive the Debt Burden Lower.
-- The Implementation of Political Commitments by the National Government Could Strengthen Regional Debt Metrics.

"Spain's relatively strong economic growth rate has supported fiscal performance in the regions," said Jorge Espinosa, Assistant Vice President in the Global Sovereign Ratings Group. "However, tighter expenditure control by the regions, in line with the medium-term structural plan, is needed in 2025."