Fitch Upgrades Spain’s Credit Rating Amid Economic Strength and Political Uncertainty
Spain's credit rating upgraded to A by Fitch due to strong economic growth and job creation, though political instability and fiscal challenges persist, warns the IMF.
- • Fitch upgrades Spain's credit rating from A- to A, highest since 2012.
- • Strong economic growth projected at 2.6% in 2025, driven by job creation and recovery.
- • Political instability and fiscal challenges raise concerns for budget approvals and deficit control.
- • IMF acknowledges improved rating but cautions about economic and political risks.
Key details
Fitch Ratings upgraded Spain’s sovereign debt credit rating from A- to A at the end of September, marking its highest rating since 2012. This upgrade reflects Spain’s stronger-than-expected economic performance, particularly its robust job market and potential for growth, positioning it as the strongest among major European economies, according to Fitch (ID 90632).
The upgrade follows solid economic indicators, including a labor market bolstered by Latin American immigration and a decrease in temporary employment following the 2022 labor reform. Spain’s economy is projected to grow by 2.6% this year, doubling the average growth rate of the eurozone. Key sectors such as tourism, services, and manufacturing have rebounded strongly post-pandemic, aided by competitive advantages in renewable energy and significant EU Next Generation recovery funds.
Despite these positive developments, Fitch highlighted risks, chiefly rising political instability and slow fiscal adjustments. Parliamentary fragmentation raises doubts about the government’s ability to pass new budgets in 2026. The public deficit has been reduced from pandemic heights but mainly due to post-lockdown recovery and tax revenue increases rather than active fiscal consolidation. Fitch estimates the deficit will fall to around 2.5% of GDP by 2026 but climb back to about 3% afterward, far from the government’s 0.8% target by 2031.
The International Monetary Fund similarly recognizes Spain’s improved credit rating but cautions about ongoing economic and political risks. It warned about the growth of shadow banking and also expressed concerns over political instability affecting fiscal governance. The IMF’s remarks coincide with a proposal from the Spanish government to establish a transparency portal to improve public spending oversight (ID 90630).
With Spain’s enhanced credit rating making the country more attractive to investors and potentially lowering financing costs, experts note that sustained political stability and fiscal discipline will be essential to maintaining these gains. Fitch contrasts Spain’s outlook favorably with challenges faced by other European countries such as France and Italy, whose ratings have been downgraded amid political crises and high debt levels.
As of October 7, 2025, Spain stands at a crossroads: benefiting from strong economic recovery and institutional improvements but navigating significant political uncertainties that could impact its fiscal trajectory.