Spanish Regions' Annual Funding Report: Increased Bond Issuance Expected in 2025

Due to its significant rise between 2008 and 2016, Spanish regional debt continues to account for a large share of Spain`s general government debt, standing at 20.3% as of the third quarter of 2024. At the same time, it amounted to 21.2% of GDP. Although the central government has been able to enact some controls to begin bringing the debt level down, it remains relatively high when compared with European peers. Spanish autonomous communities have traditionally been active in bond markets, generally combining their debt issuances with loans from commercial banks. However, since 2012, many regions remain largely dependent on central government funding, even though the fiscally strongest regions have remained very stable issuers of bonds. For 2025 onwards, we expect bond issuance to continue to increase. The regional debt relief expected from the central government this year could accelerate the market access of some regions that are currently not authorised to issue bonds.

Key Highlights include:

-- The Spanish regional sector accounts for a large share of general government debt and is under tight central government supervision.
-- Spanish regional funding still depends largely on state debt financing mechanisms due to the still relatively weak fiscal performance of the most indebted regions.
-- Market debt funding continues to grow and could accelerate upon debt relief mechanism expected from the central government.

Quote:

"Spanish Regional Debt remains high, and the sector relies on the state debt financing mechanisms to meet large refinancing needs", said Jorge Espinosa, Assistant Vice President in the Global Sovereign Ratings Group. "However, we expect the debt drawn from bonds to increase over the medium term and we believe that the fiscal and the financial improvement stemming from the regional debt relief initiative could accelerate the return of several Spanish regions to capital markets."