Spain’s public debt has seen a notable decline over the past year, now standing at 101.8% of its Gross Domestic Product (GDP), as reported by the Bank of Spain. This figure surpasses the Spanish government’s goal of reaching a debt ratio of 102.5% by December 31, a significant improvement from the 105.1% recorded at the end of 2023.
Debt Reduction Amid Economic Growth
The total public debt, calculated according to Maastricht criteria, amounted to €1.622 trillion by the end of December. In absolute terms, this figure reflects a 2.9% increase compared to the end of 2023. However, when measured against Spain’s GDP, the debt has decreased by 3.3 percentage points, highlighting a positive trend in fiscal management.
Robust Economic Performance
One of the key reasons for this debt reduction is Spain’s robust economic growth, which reached 3.2% last year—nearly five times the eurozone average of 0.7%. This growth has bolstered tax revenues and helped mitigate the impact of government expenditures aimed at supporting household purchasing power during the ongoing Ukraine conflict.
A Historical Perspective
Just a few years ago, Spain’s public debt was among the highest in Europe, peaking at 124.2% in March 2021 due to significant spending to counter the economic fallout from the COVID-19 pandemic. Since then, the government has been actively working to decrease this burden.
Aiming for a Public Deficit Below 3%
Prime Minister Pedro Sánchez remains optimistic, projecting a continued economic growth of 2.6%. He has pledged to further reduce the public deficit—the gap between national income and expenditure—to 2.5% of GDP this year, down from the anticipated 3% for 2024.
Challenges Ahead: Persistent Inflation
Despite these positive trends, Spain faces challenges such as persistent inflation. In January, the inflation rate surged to 2.9%, a 0.3% increase from the previous month, according to the National Statistics Institute (INE). Notably, this rate marks an uptick from November’s 2.4%, indicating a shift away from the European Central Bank’s target of 2%.
Since September, inflation has nearly doubled since its low of 1.5%, complicating the economic landscape and prompting concerns about maintaining financial stability.
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