Canary Islands unveil €12.5 bn budget (+7%), growth slows in 2026

The Canary Islands government announced changes to next‑year tax rates for sugary drinks, bio‑fuels and medical equipment. The 2026 draft budget, which projects regional GDP growth below 2 %, was presented to the Advisory Council. President Fernando Clavijo emphasized that the Canary Islands “submit their accounts on time and in form,” despite the state’s extension of the 2023 budget.

Budget Overview

The 2026 budget will amount to €12.491 billion, a 7 % increase over the current accounts. The draft, disclosed by the executive, was submitted to the Advisory Council.

Key fiscal figures include:

• GDP growth forecast: 1.9 %
• Unemployment rate: 12.8 %
• Public debt: 10.4 % of regional GDP

The government also unveiled a package of tax cuts.

Among the tax measures are:

• Enhanced deductions in the Canary Islands General Indirect Tax (IGIC) and the Property Transfer Tax (ITP) for the purchase of a primary residence.
• Deflation of the personal income tax (IRPF) linked to CPI movements.
• Introduction of a 1 % IGIC rate on fuels and the removal of the AIEM levy in the same sector.

Change of Tax Rates for Sugary Drinks

The budget creates a deduction for investment in newly created or recently created entities and introduces a graduated IGIC rate for energy drinks and soft drinks based on their added‑sugar content.

Additional measures:

• Hydrogenated vegetable oil will be classified under the 0 % IGIC rate as a bio‑fuel.
• Hospital beds will also be taxed at 0 %, treated as medical devices.
• Tobacco taxes will be raised in certain categories to narrow the fiscal gap with mainland Spain and the EU.
• Nicotine pouches will shift from an ad‑valorem to a specific tax.

“These accounts bet on people, sustainability and the improvement of essential public services such as health, education, social services and housing,” said President Fernando Clavijo after meeting the Advisory Council.

Slower GDP Growth Expected in 2026

The government projects a moderate 1.9 % increase in regional GDP for 2026, a slight slowdown in job creation, and inflation of 2.1 %. Nonetheless, the unemployment rate is expected to fall to 12.8 %.

“Our priority is the wellbeing of all Canary Islanders and the advancement of a solidary society committed to our people,” Clavijo added.

He also highlighted the administration’s commitment to “designing budgets based on real spending,” a principle adopted since the start of the legislature that “makes a difference and allows us to be transparent with citizens.”

“The Canary Islands continue to meet the obligation of presenting their accounts on time and in form, despite the uncertainty generated by the extension of the state budget,” Clavijo noted.

Challenges Linked to the Lack of a State Budget

The regional government points out that the absence of an approved state budget and the lack of a reference rate for 2026 have complicated the preparation of autonomous accounts. The 2024 European fiscal reform, which would grant greater spending flexibility, has not yet been incorporated into the national framework.

Finance Minister Matilde Asián described the budget as “expansive but prudent,” allowing the government to meet the needs of Canary Islanders while preserving structural balance and fiscal‑rule compliance.

“Because we lack information on the state’s allocations for the Canary Islands in 2026, we can only reflect recurring amounts or those previously agreed with Madrid,” Asián explained.

Government, Business and Unions at the Advisory Council

The Advisory Council, attended by representatives from business, unions and the government, learned that the draft is slated for approval by the Government Council on Wednesday. Participants included:

• President Fernando Clavijo and Finance Minister Matilde Asián
• Social Welfare Minister Candelaria Delgado
• Public Works Minister Pablo Rodríguez
• Tourism Minister Jessica de León
• Vice President Alfonso Cabello
• Vice Minister of Finance Gabriel Mejías
• Secretary‑General of the Presidency Ceferino Marrero

Business representatives: Pedro Ortega and José Cristóbal García (Canary Confederation of Employers, CCE, Las Palmas) and Pedro Alfonso Martín and Elena Vela (CEOE, Santa Cruz de Tenerife).

Union representatives: Manuel Navarro and Francisco Bautista (UGT) and María Vanesa Frahija and José Ramón Barroso (CCOO Canarias).