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Diari Valencià

S&P Warns Spending Pressure Will Test Autonomous Community Finances in 2026 and 2027

The rating agency anticipates a more demanding scenario for regional governments, despite improved revenues in 2025, with the Valencian Community among those most affected.

Generic image of financial pressure on autonomous communities.
IA

Generic image of financial pressure on autonomous communities.

The rating agency S&P Global has warned that the finances of Spanish autonomous communities will face a more demanding scenario in 2026 and 2027, due to increased spending and the end of European funds, despite improvements in 2025.

After a better-than-expected performance in 2025, autonomous communities are facing a change of cycle in their finances. S&P Global indicates that spending pressures could deteriorate their budgetary performance. Among the main risks, the agency highlights the increase in public sector salaries, a possible rebound in inflation, reconstruction costs from disasters like floods, demographic aging, and the need to execute European funds from the Recovery and Resilience Mechanism before August 2026.
The S&P report emphasizes that the strong performance in 2025 was based on robust revenue growth and a moderation of operating expenses. Autonomous communities' own tax revenues, especially the property transfer tax, performed better than anticipated. Revenues grew by 4% in 2025, exceeding the 3.3% forecast, and the surplus reached 3.5% of operating revenues.
However, the margin will narrow from now on. The agency expects the growth of the Spanish economy, and with it, regional revenues, to moderate, only partially offsetting the escalation of costs. For 2026, S&P is confident that the autonomous financing system will continue to support revenues, with announced transfers 7.7% higher than in 2025, but warns that budgetary sustainability will increasingly depend on the fiscal discipline of regional governments.
Among the pressure factors, the report points to a public sector salary increase of up to 5.5% in 2027 and higher costs for goods and services if inflation rebounds due to geopolitical tensions. It also anticipates a structural increase in healthcare spending due to population aging and technological advancements. Additionally, extraordinary reconstruction costs following severe floods in 2025 and 2026 will particularly affect regions such as the Valencian Community, Andalusia, and Extremadura.
Another source of tension is the European calendar. Communities are accelerating projects to avoid losing funds from the Recovery and Resilience Mechanism before the August 2026 deadline. S&P estimates that the execution rate of these funds was around 70% in February 2026. The report also highlights persistent inequalities among autonomous communities, noting that the current financing system creates significant differences in resource allocation and indicates that regions like the Valencian Community and Murcia are disadvantaged.

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