The economic outlook of Portugal and Spain, and their long-term ageing challenge

Summary

This presentation, delivered on the 10th anniversary of the BBVA Pension Institute in Portugal, analyzes the economic forecasts for Portugal and Spain, and the challenge of long-term aging of their population, as one of the challenges facing public systems pensions in Europe.

Key points

• Key points:
• In Spain, GDP growth is revised upwards by four-tenths in 2024 to 2.5% and by one-tenth in 2025 to 2.1%. Meanwhile, in Portugal we forecast growth of 2.2% for both years.
• Portugal and Spain have shown a differential performance compared to the rest of the eurozone since the start of the Russian invasion of Ukraine. The convergence in the post-COVID-19 recovery is mainly due to the acceleration in exports of services (both tourism and non-tourism).
• Unlike Portugal, it is estimated that Spain needs a fiscal consolidation of about 2.5 pp of GDP in the primary structural balance to comply with the fiscal rules.
• The main challenge facing the pay-as-you-go pillar of the European public pension systems is the result of two excellent news: people are living longer due to the increase in life expectancy after reaching 65 years and the baby boom generations have begun to retire or will do so in the coming years.
• Although there is considerable uncertainty in population projections, all of them point to an increase in the dependency ratio of 64% in European countries between 2022 and 2070. In Portugal, the increase will be 66%, lower than in Spain (94%).

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