Moody's rating agency warns Spain that the current pension system could affect the country's credit rating, currently at “Baa1” with a stable outlook, which would make it difficult for it to be financed in the markets. The analysis published by Moody's does not in any way imply a reclassification for Spain, but it does draw attention to the sustainability of pensions in the face of the aging of the population and their revaluation with the CPI and the impact on the country's rating.
The Spanish Social Security deficit, stresses the agency, "will increase significantly" in the next two decades if new adjustment measures are not taken. Specifically, Moody's estimates that, without additional measures to those already adopted, the deficit of the Social Security system will increase to 1.4% by 2030 and to 3.2% by 2040, compared to 0.5% It also foresees that this negative balance will not begin to decrease until the end of the 2040s, when it will reach a maximum of 4% of GDP, even exceeding the deficit expected for all levels of the Administration in 2024, from 3.2%
Regarding the reform of the pension system, he considers that, despite including measures to increase income and incentives for delaying retirement, these "will be overshadowed" by the expected increase in pension spending due both to the aging of the population and its relationship with inflation.
Thus, assuming no change, Moody's estimates that Social Security spending, including pension and non-pension spending, will rise to around 15% of GDP by the end of this decade. and up to 16.8% in 2040, from 13.5% in 2022.
For its part, Social Security income will rise to around 13.7% of GDP by the end of this decade, up from 13.1% in 2022, before falling again to 13% when temporary measures expire. adopted by the Government, according to Moody's calculations.
These projections assume that Central Administration transfers will increase in line with inflation from 2.7% of GDP received in 2022.
"Revenues could be lower, however, if the new measures have undesirable economic effects. Some estimates suggest that the new measures will cause a permanent job loss of more than 100,000 jobs. This is especially relevant for a country like Spain , where the unemployment rate continues to hover around 12% despite the improvements of the last decade", underlines Moody's. The agency warns in its report that, if measures are not taken, pensions will exert credit pressure at the end of this decade.
In previous studies we have underlined that the worsening of fiscal imbalances due to measures to increase the deficit would exert negative pressure on the rating”, he points out. For this reason, it recommends actions: "the application of new savings measures to guarantee the long-term sustainability of the pension system would be positive from a credit point of view," says the agency.
Moody's insists that the Spanish population is aging “at one of the fastest rates in Europe”, and that it will reach 14 million pensioners in the 2050s compared to 9 million last year.
The general secretary of UGT, Pepe Álvarez, responded on Tuesday to the agency's report and remarked that the reforms adopted in recent years "have clauses that permanently" will warn of "alarm points" that the system has, reports Europe Press.
“It is not an agreement that has been signed until the year 2050, but rather an assessment every three years. We are going to evaluate it after an AIReF report every three years and we are going to take the appropriate measures depending on whether there is any deviation or there is no deviation. We do not want our country's pension system to rot and for us to find ourselves in a moment that cannot be addressed,” he concluded.
