Social Security budget for 2022: Short-term state support yet a need for structural reform
Fecha: noviembre 2021
Eduardo Bandrés Moliné
Social Security
SEFO, Spanish and International Economic & Financial Outlook, V. 10 N.º 6 (November 2021)
The two main developments in the Social Security budget for 2022 are: (i) the implementation of a new method for revaluation of pensions based on prior-year inflation; and, (ii) growth in state transfers to finance the so- called “undue” expenses being funded by the Social Security and help balance its accounts. Despite the sharp growth in pension spending, the increase in contributions from the state via taxes and the forecast growth in insurance contributions, underpinned by the anticipated economic recovery, are expected to drive a reduction in the nominal deficit to 0.5% of GDP in 2022. However, the shortfall in system contributory revenue relative to expenditure will remain at 1.5% of GDP. Correction of the Social Security’s structural deficit in the mediumand long-term will, therefore, require new measures that will necessarily have to combine action on the revenue side (even after the recently proposed increase in employer contributions) with others on the spending side, with contributory pensions
the primary focus of any future reforms.