The Foundation for Applied Economic Studies (Fedea) estimates that Catalonia will be the autonomous community that will devote the greatest financial expenditure to debt interest in 2027, with almost 3 billion euros, double that of the Community of Madrid, which will amount to 1.586 million euros, according to these forecasts.
This is indicated in one of its latest reports, prepared by Fedea researchers Manuel Díaz and Carmen Marín, in which it is estimated that the financial expenditure of the Autonomous Communities in interest on debt will increase to 12,037 million euros in 2027. This amounts to multiplying by 3.3 the resources that were dedicated in 2022 to meet the financial burdens of regional public debt.
Catalonia would be the region that would devote a greater financial expenditure to interests in 2027, almost 3 billion euros, almost three times more than in 2022 and double that of Madrid, for which an expenditure is estimated linked to interest of 1.586 million, double that of 2022.
According to Fedea, the average rate of regional public debt, defined as the quotient between the annual payment of interest and the outstanding public debt at the end of the year, will reach 3.4% in 2026, compared to 1.1% in 2022.
The increase in the average debt rate will be greater in communities with part of their debt in the hands of the State through the Autonomous Fund of Liquidity and Financial Facility than in those that are not financed by these extraordinary mechanisms (Navarre, Basque Country and Madrid).
In Catalonia, the increase in the average rate from 2022 to 2027 will be two points, up to 3.2%, the same increase expected for Madrid, which will place the average rate at 4.2% at the end of the said period.
However, the highest average rate projected by Fedea for 2027 corresponds to Asturias, with 4.6%, while the lowest would be that of La Rioja, with 2.4%.
While over the period 2015-2022, the average interest rate on public debt was 0.5%, it is currently above 3%. “Therefore, our estimates of the gap between the interest rate on debt issued in previous years and the interest rate at which it is currently issued is around 2.5%,” explains Fedea.
The figures from a few years ago have tripled.
The financial expenditure of the autonomous communities in interest on their public debt would be around 12 billion euros in 2027, more than triple the 3,608 million euros in 2022, if they issued new debt to finance the maturities of what is currently outstanding and the projected deficit.
Specifically, Fedea takes as a reference for these projections the forecasts for nominal GDP growth and the reference targets for the public deficit of the autonomous communities included in the Situation Report of the Spanish Economy 2024, the average life and maturities of the public debt currently in circulation, and the interest rates in force since 2015.
Going further, Fedea would accept, in its projections, that the Autonomous Communities reach the reference objectives of the new deficit trajectory established by the Government (0.1% for the years 2025-2027). By 2024, the institution estimates that the Autonomous Communities will close with a deficit of 0.3%, the percentage predicted by AIReF (AIReF, 2024).
“We could imagine here that, given that there has been a notable dispersion of the values of the regional public deficit so far, this could continue in the years to come. Of course, we do not exclude the realism of this situation. It is a possibility, but on the other hand, we can also hope that a possible reform of the regional financing system will reduce this dispersion of regional financial imbalances,” the organization states.
The work, prepared by Fedea researchers Manuel Díaz and Carmen Marín, recalls that the autonomous communities must undertake a process of budgetary consolidation in the coming months to comply with the newly agreed budgetary rules within the European Union.
Everything indicates that in the medium term, if no further reforms are undertaken, the requirements set out in the organic law on budgetary stability and financial viability will be resumed, according to which the autonomous regions must achieve budgetary balance in structural terms, adds Fedea.
The institution estimates that the volume of absolute public debt will increase by 28.351 million euros between 2022 and 2027, due to the increase in the level of indebtedness observed between 2023 and 2022 (8.145 million euros), the need to finance the projected deficit in 2024 as well as the unpaid deficits of previous years (11.353 million), the payment of compensation for 2008 and 2009 postponed for twenty years (3.774 million) and the need to finance the deficits expected between 2025-2027 (5.079 million). This would give rise to a public debt of 345.440 million euros in 2027.
However, if we consider the public debt as a percentage of GDP, we observe a reduction of 4.3 points, which is explained by the increase in GDP forecast by the Ministry of Economy and Competitiveness. Therefore, The debt-to-GDP ratio would decrease in 2027 to 19.6%, compared to 23.9% in 2022.
