Against this background, the Stability Programme Update considers a continuation of the fiscal adjustment which, in any event, would still entail in 2021, eight years after the start of the economic expansion, a structural deficit of over 1 pp of GDP and public debt of almost 90% of output. Maintaining levels of public debt around those currently prevailing in the Spanish economy involves significant costs that need to be taken into account. It entails the deviation of major resources for interest payments and, above all, vulnerability in the face of episodes of tightening financing conditions on international markets, restricting the possibilities of pursuing a countercyclical fiscal policy at times of economic recession. In sum, it is most important to harness the current favourable circumstances of the Spanish economy to redress, as soon as possible, our structural deficit and public debt levels, bringing them in line with the standards set by our legislation and European regulations. I would underscore, too, the challenge posed by the ageing of our population, in particular for our pension system. This is essentially a medium and long-term challenge; but for that very reason, tackling it appropriately is more difficult than other, shorter-term challenges. The latest Social Security reform, in 2013, introduced two automatic adjustment mechanisms (the Sustainability Factor and the Revaluation Index) which sought to ensure a balance between the system’s revenue and expenditure.
It is estimated that the growth of our economy will continue to be underpinned, above all, by national demand, but with a positive – though diminishing – contribution from the external sector. In particular, household consumer spending and residential investment will continue to be assisted by rising employment, the sector’s improved financial position, the fiscal impulse and favourable financial conditions. Also, the growth of demand and of corporate earnings, higher capacity utilisation and the aforementioned propitious financial conditions will continue to provide for significant increases in investment in capital goods. Nonetheless, the tailing off of some of the temporary factors that have supported the increase in activity in Spain in the most recent period would explain the moderation in growth expected in the coming years. This would be the case were there to be a reversal in the trend of oil prices, in the expansionary effect of monetary policy and in the momentum of external markets, following their significant dynamism last year. As regards prices, the latest data continue to show, as in the euro area as a whole, very moderate behaviour, with the year-on-year growth of the CPI standing at 1.1% in April. The Banco de España projections published in March augured an increase of 1.2% for the year as a whole; however, it might ultimately be higher owing to the impact of the recent rises in oil prices. In this respect, the current volatility on the oil markets adds further uncertainty to the evolution of prices in the short term.