The Spanish economy presents a favorable situation, with GDP growth that is surprising on the rise and is ahead of the main economies in the euro zone. But one thing is joint (of the moment) and another, the structure (medium and long term). And it is here where the Annual Report of the Bank of Spain, published this Tuesday, brings to light all the uncertainties that, in his opinion, darken the prospects of the Spanish economy and that affect, in his opinion, the pension systemto the working marketto the taxesat public accountsaccess to housing, the size of the companiesto the productivity, To the system educational or to the reduction of social inequalities.


“Spain has been failing to maintain a path of sustained convergence in rent per capita with the rest of our European partners”, certifies the governor of the Bank of Spain, Pablo Hernández de Cos, in the presentation of the Annual Report. “Reversing these trends will require ambition and major political agreements that allow the consolidation of the necessary reforms over time “acknowledges the governor after warning that – as the International Monetary Fund (IMF) has said in its recent report on Spain – “the lack of consensus, in a context of high political fragmentationmay hinder the design and implementation of structural reforms and the fiscal consolidation plan, and negatively affect future growth prospects.”

Pension adjustment

In the case of public pension system, the Annual Report sees practically inevitable the need to adopt new adjustment measures starting in 2025 (to raise contributions or cut the amount of the benefit). This will be so if in March 2025 The Independent Authority for Fiscal Responsibility (Airef) certifies spending on pensions has reached 13.3% of GDP. In 2023 this spending reached 13.1% and projections recently published by the European Commission warn of greater growth than the Government had estimated.

The recent report 'Aging Report 2024' of the European Commission foresees that the recent reform of the pension system in Spain (which, among other issues, guarantees the revaluation of benefits with the CPI) will raise the weight of pension spending to 17.3% of GDP in 2050. Airef projects a weight of 16.2% in the horizon of 2025 and the Bank of Spain points to a range of between 14.3% of GDP and 16.9%, according to different economic growth hypotheses.


The reform promoted by the minister José Luis Escrivá incorporated a safeguard clause so that when spending exceeds 13.3% of GDP, adjustment measures are adopted on the income side (with new increases in contributions) or expenses (with a cut in benefits). for a period of five years. The Annual Report of the Bank of Spain advises against further increases in social contributions since, according to their calculations, each point that the quotas increase entails 50,000 fewer jobs after four years. “The Bank of Spain's estimates suggest that, if activation (of the safeguard clause) is necessary, make the corresponding adjustment exclusively through an increase in the social contributions could be detrimental to employment and the competitiveness of the Spanish economy,” says the governor of the Bank of Spain.

24.6 million more immigrant workers

The demographic reason behind the explosion in pension spending has to do with the so-called 'dependency rate'. Currently, the weight of the group of people over 64 years of age in the total population is around 26.6%. According to Eurostat demographic projections, the dependency ratio at 27.2 points, up 53.8%, in 2053.

According to the Bank of Spain, “for the dependency ratio in Spain to remain constant over the next 30 years, the size of the group born abroad of working age twould have to be three times greater than that contemplated by the INE in its most recent population projections”, which already foresee a gain of almost 10 million immigrant population until 2053. Specifically, according to the estimates of the Bank of Spain, In 2053, 24,673 million more immigrants of working age would be needed to maintain the current dependency rate of 26.6%.

Some 11,000 million more due to 'cold progressiveness'

The Bank of Spain also advises a profound reform of the tax system which, among other issues, serves to increase the collection weight of indirect taxes (VAT and special taxes) and environmental taxes compared to direct taxes (IRPF and corporate tax).


The Annual Report of the Bank of Spain includes an analysis of the increased collection that the Treasury is allowing due to the fact that it has not corrected the impact of inflation on income tax. According to data from the Tax Agency, personal income tax collection has gone from 86,821 million in 2019 to 115,739 million in 2023, with an increase of almost 29,000 million. The calculations of the Bank of Spain allow us to conclude that if inflation in personal income tax had been corrected from 2019 to 2023 according to the CPI of the previous year, the collection for this tax would have been 11 billion lower.

The research service of the Bank of Spain also concludes that the salary bracket most affected by the call “cold progressivity” (as the impact of inflation on taxes is known) is the one included between 16,385 and 19,873 euros. In this section, each point of salary increase translates into a 10% increase in your income tax rate if inflation is not corrected.

A budget adjustment similar to that of 2010-2013

The governor of the Bank of Spain also warns that “given the persistence of a high structural public deficit and a high public debt, compliance with the new European fiscal rules will require the implementation of a fiscal consolidation plan that allows a gradual correction of these imbalances.” The organization has estimated that complying with the fiscal rules will force an annual adjustment of public accounts equivalent to 0.5% of GDP in each of the next exercises. This is an adjustment of similar magnitude to the one that the Spanish economy had to undertake in the period of the debt crisis, between 2010 and 2013 – during the final stage of the Government of José Luis Rodríguez Zapatero (PSOE) and the first years of the Government of Mariano Rajoy (PP)-, according to estimates by the Bank of Spain.

Hernández de Cos warns that “the impact of said adjustment plan would predictably entail a lower degree of dynamism in activity than expected” and proposes that the measures adopted be accompanied by structural reforms that favor “the potential growth of the economy.”

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