International Monetary Fund staff published the concluding statement for the 2026 Article IV mission to Spain, finding that the economy continues to outperform euro area peers but faces predominantly downside risks tied to geopolitical tensions and domestic political fragmentation. With growth still resilient under the baseline, staff recommend speeding up discretionary fiscal consolidation to rebuild fiscal space ahead of aging-related spending pressures, and introducing mortgage-related borrower-based measures in the coming year to pre-empt housing-driven financial vulnerabilities. Staff project GDP growth of about 2.1 percent in 2026 and 1.8 percent in 2027, with headline inflation reaching about 3.0 percent by end-2026 before falling to 2.2 percent by end-2027. The general government deficit is expected to fall to 2.5 percent of GDP in 2025 from 3.1 percent in 2024, but under a current-policies baseline the deficit is projected to stabilize above 2 percent of GDP by 2031, versus 0.8 percent envisaged in the authorities’ medium-term fiscal structural plan, implying consolidation measures of almost 1.5 percent of GDP; staff see scope to deliver the plan’s cumulative 2.5 percentage point improvement in the cyclically-adjusted primary balance by 2030 through annual adjustment of 0.5 percentage points in 2026-2030. Recommendations also include conditioning any reduction in autonomous communities’ debt and higher transfers on credible consolidation plans and a reformed subnational fiscal rule centered on strictly enforced expenditure growth limits, and taking more forceful steps to boost housing supply alongside introducing collateral-based mortgage borrower-based measures, complemented by the ongoing increase of the positive neutral countercyclical capital buffer to 1 percent by October 2026. IMF staff will prepare a report, subject to management approval, for discussion and decision by the IMF Executive Board.

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