AIReF warns: The Balearic Islands could fail to comply with the spending rule in 2025 and 2026

PalmThe Independent Authority for Fiscal Responsibility (AIReF) maintains that the Balearic Islands face a risk of exceeding the spending rule in 2025 and 2026 and has worsened its deficit forecasts. According to the agency, the deficit could reach 0.1% of GDP in 2025 and 0.2% in 2026. This is stated in the report on the projects and budget lines of the autonomous communities, which analyzes the information provided by the Government on its key priorities for 2026, a document prepared prior to drafting the budget for the following year. AIReF examines the forecasts and measures included in the document and assesses the likelihood of compliance with the established fiscal rules. Regarding the spending and deficit rule, the Authority calculates that eligible spending will increase by 5.6% in 2025 and 6% in 2026, exceeding the established limits of 3.2% and 3.3%, respectively. If the spending rule is strictly adhered to, the Balearic Islands would register a surplus of 0.1% in 2025 and 0.3% in 2026. However, according to AIReF, the archipelago anticipates spending growth adjusted to the reference rate in 2025 and slightly lower growth in 2026, which allows for [the following].

Revenues and expenditures

The Independent Authority for Fiscal Responsibility (AIReF) estimates that the Balearic Islands' revenue, excluding funds from the Recovery, Transformation and Resilience Plan (PRTR), will grow by 4% in 2026 and represent 13.4% of GDP. This increase is primarily due to a 4% rise in resources from the financing system. A 5% increase in tax and production-related revenue is also expected, along with positive performance from European funds. The Balearic Government is maintaining the permanent tax reduction measures already announced in previous reports, updating their amounts, and incorporating new actions to increase revenue with a more moderate impact. Regarding spending, the Executive forecasts that the regional accounts, excluding PRTR funds, will grow by 3% in 2025 and 5% in 2026, reaching 13.7% of GDP. Outlook to 2030

Looking ahead to the medium term, AIReF warns that the risk of breaching the state spending rule could persist in 2027, as primary spending—excluding revenue measures—would continue to grow above the level set by the Medium-Term Public Finance Program (PFEMP). Despite this scenario, the Authority forecasts that the Balearic Islands could achieve a surplus of 0.2% of GDP in 2030 if they maintain consistent fiscal policies. Regarding debt, the regional government's estimates for the 2025-2026 period are more optimistic than AIReF's, as they are based on more favorable fiscal projections. The independent body calculates that the debt-to-revenue ratio will continue to decrease in 2025 and 2026, although at a slower pace than the debt-to-GDP ratio. In the medium term, the downward trend is expected to continue.