The President of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, took part today in the forum on ‘Demographics and Pensions’ organised by the EY Talent and Innovation Institute, where she examined the impact of population ageing on public finances—one of the main challenges facing Government accounts in the coming years.
The President began by stressing the importance of demographics as a determining factor in medium- and long-term fiscal sustainability. She noted that demographics have undergone significant changes in recent times, affecting economic growth and all components of public finances: revenue, expenditure, and debt.
AIReF, which safeguards the sustainability of public finances, therefore incorporates the demographic dimension structurally into its analyses and has produced its own forecasts since 2018, to ensure the internal consistency of its long-term macroeconomic and fiscal projections.
A larger but ageing population
AIReF’s latest demographic projections, published last year, indicate that the total population will exceed 52 million by 2050, driven by increased longevity and net external migration. However, this growth will be accompanied by an ageing population, with the dependency ratio nearly doubling by 2050 to fewer than 1.4 people of working age for every inactive person.
The working-age population will peak around 2029 and then decline, with immigration insufficient to offset this decrease. Although participation rates among women and people over 60 are expected to rise, these increases will not be enough to counteract the negative impact of ageing.
Macroeconomic and fiscal implications
Cristina Herrero stated that labour’s contribution to growth will tend to decline, making it increasingly important for productivity to play a central role. AIReF projects that the Spanish economy’s potential growth will tend towards 1.3% over the long term, supported by average productivity growth of 1.1%, which is higher than in recent decades. According to the President, achieving this growth is one of the main challenges for economic policy and sustainability.
From a fiscal perspective, she noted that population ageing will place increasing pressure on public spending, especially on pensions, healthcare, and long-term care, in a context where revenues will grow more moderately. With unchanged policies, this dynamic increases risks to the deficit and public debt over the long term, as spending rises on an inertial basis while potential growth slows and interest costs increase.
Need for planning and evaluation
The President stressed that addressing the demographic challenge requires combining budgetary rigour with policies that promote economic growth. She emphasised the need to advance credible budgetary planning, adapt the national fiscal framework to the new European framework, and strengthen public policy evaluation. High international uncertainty and economic and institutional weaknesses will not stop these structural challenges from coming increasingly to the fore, she noted, making it essential to anticipate them and prioritise spending commitments over the medium and long term.
