The Spanish government announced on Tuesday its approval to increase the spending ceiling for 2026 by 8.5% compared to the maximum allowed for this year, while also aiming to reduce the budget deficit in the period between 2026 and 2027.

This move comes as Spain's economy continues to grow at a faster pace than many of its European counterparts.

The new cap, revealed by Budget Minister María Jesús Montero, sets total expenditure for next year's budget at €216.2 billion ($250.7 billion).

This amount includes approximately €4 billion sourced from European recovery funds. The government has yet to finalize and submit this budget plan to parliament for approval.

In recent years, Spain renewed its 2023 budget twice without introducing a draft bill to parliament.

Despite these delays, Montero expressed her intention to introduce a new spending plan for 2026. She stated she hopes "most parties will view it as an essential step so that families can benefit."

Meanwhile, Economy Minister Carlos Cuerpo announced that Spain is targeting a budget deficit of 2.1% of GDP in 2026-down from an estimated 2.5% this year-and plans further reduction to 1.8% by 2027.

However, he noted these targets do not account for exceptional expenses linked to recovery efforts in Valencia following last year’s catastrophic floods.

On Tuesday, the government also revised its growth forecast for this year upward, projecting economic expansion at 2.9%, up from previous estimates between 2.6% and 2.7%. Growth during the fourth quarter alone is expected to range between 0.6% and 0.7%.

For context, Spain's overall economic growth in the current year is projected to be more than double the average rate recorded across the European Union’s 27 member states.

Cuerpo added that growth is expected to moderate slightly next year-to around 2.2%-and remain steady at approximately 2.1% through both 2027 and 2028.

The economy minister further explained that future policy objectives will integrate both macroeconomic and microeconomic indicators when evaluating Spain’s progress toward reducing inequality and poverty rates-including income disparities between the top-earning fifth of citizens and those with the lowest incomes.

Cuerpo emphasized: "It is extremely important for us to highlight how this growth acts as a necessary condition for reducing inequality and poverty-in other words, improving daily living conditions for our citizens."