Despite an increase in absolute public debt to €1.663 trillion in May 2025, Spain has managed to lower its debt-to-GDP ratio to 102.3% thanks to robust economic growth. This two-percentage-point reduction compared to the previous year indicates a positive trend, even as the absolute debt has risen by €60 billion since May 2024.
Economic Growth as Key to Debt Reduction
Spain’s sustained strong economic growth is the primary driver behind the reduction in its debt ratio. Although public debt in absolute terms is 3.8% higher than the previous year, GDP growth has pushed down the percentage of debt relative to GDP. This is according to the latest data from the Bank of Spain (BdE). Compared to the peak in March 2021, when the ratio reached 124.2% of GDP, it has now fallen by almost 22 percentage points – an impressive achievement. Even against the previous month of March 2025, with €1.667 trillion, the ratio decreased by 0.24%.
Spain’s Path Out of Crisis and Future Commitments
In recent years, the Spanish government has taken extraordinary measures to mitigate the economic consequences of the Covid-19 pandemic, the energy crisis, and rising inflation. These initiatives, known as the “social shield” or anti-crisis measures, have helped Spain approach the future from a more favorable position. This is particularly crucial given the need to increase defense spending – a commitment that Brussels will not factor into the assessment of budgetary targets.
The government has committed to Brussels to reduce its debt ratio to 101.4% of GDP this year, with the new fiscal rules coming into effect. Mid-term forecasts in the Budget and Structural Plan project further reductions to 98.4% in 2027, 90.6% in 2031, and even 76.8% in 2041. However, these optimistic targets contrast with warnings from the Independent Authority for Fiscal Responsibility (AIReF). The body, led by Cristina Herrero, fears that without additional reforms, the liabilities of all public administrations could rise to 129% of GDP by 2050 due to population aging.
Components of Debt Increase: Central Government, Autonomous Communities, and Social Security
The overall debt increase recorded in May is primarily attributable to the rise in debt from the central government, Autonomous Communities, and Social Security. The largest share of the debt corresponds to central government debt, which stood at €1.509 trillion at the end of May, a 4.4% increase year-on-year and 92.9% of GDP.
A particularly notable item is the Social Security debt, which stands at €126 billion. This represents an 8.6% increase compared to the previous year and accounts for 7.8% of GDP, bringing it very close to its all-time high of €126.177 billion in November of the previous year. This level indicates a structural problem within the system: social contributions are currently insufficient to cover state pension expenditures, particularly for retirement. This forces the state to make regular transfers. In May alone, Social Security allocated a record €13.532 billion for contributory pensions, with almost three-quarters of that (€9.893 billion) used for pension payments.
In contrast, the debt of local entities decreased by 1.1% to €23 billion, representing 1.4% of GDP. Autonomous Communities, on the other hand, recorded a debt of €336 billion, equivalent to 20.7% of GDP, marking a positive change of 0.9% year-on-year.
