Bankinter: Fitch maintained its rating at AA-, but downgraded its outlook to Negative. It justified its decision on the sharp rise in the Public Deficit: it is expected to close this year at 6.1%, far from the limit imposed by the EU, 3%, from Fitch’s previous estimate, 5.1%, and from the 2023 level, 5.5%. They do not expect it to reach the 3.0% target until 2029. Consistently, they estimate that Public Debt will reach 116.3% of GDP in 2026 (111.6% at present). On the other hand, it referred to the fact that the political situation, characterised by a high degree of fragmentation, makes it difficult to introduce fiscal consolidation measures.
Analysis team’s view: We expect a moderate market impact, as expected. Moreover, it comes after the presentation of the 2025 Budget. The government envisages an adjustment of €60bn (2.0% of GDP): €40bn in spending cuts and €20bn via taxes. The tax hike will affect large companies (a temporary tax that could rise to 33% from 25% for those with a turnover of more than €1,000M) and contributors with an annual salary of more than €500,000. A tax on electricity consumption and a tax on share buybacks could be reintroduced. For reference, GDP increased (year-on-year) 1.1% in 2Q24. Looking ahead, Moody’s (Aa2; 25 October) and S&P’s (AA-; 29 November) revisions are key.
