The NHS in Wales is facing a £700 million gap in funds by 2019/20, which equates to around 10 percent of its current spending, a new analysis has found.

According to independent charity The Health Foundation, nearly £300 million of the shortfall will be plugged by a 1 percent cap on annual increases in public sector pay, but the rest will need to be met through additional efficiency savings of 1.5 percent a year.

This, the group says, is above current levels in the UK but is not unprecedented, and it predicts that if the health service in Wales can ride out the near-term financial turbulence then "the long-term outlook could be optimistic".

The charity's report, The path to sustainability: Funding projections for the NHS in Wales to 2019/20 and 2030/31, concludes that "immediate and sustained action" will be necessary in tackling the urgent funding pressures facing the service, which are being fuelled by an ageing and expanding population with long-term conditions.

It argues that funding for NHS Wales will need to be increased by at least 2.2 percent each year from 2019/20 until 2030/31, and also that there is greater investment in a range of public services, primarily social care, to reduce pressure on hospitals.

Also key will be the development of a strong workforce policy that ensures that "adequate numbers of high quality and motivated staff are retained and recruited", despite continued pay caps, and a reform of care "to meet the population's changing and growing needs".

"The next few years will be tough for the NHS in Wales. Immediate and sustained action is needed to protect patient care, but long-term sustainability is possible," noted Anita Charlesworth, director of Research and Economics at the Health Foundation.

"The NHS will continue to work hard to drive efficiency but it's important to recognise that significant savings have been made in the last few years, and this becomes harder and harder to maintain each year," Vanessa Young, director of the Welsh NHS Confederation, told the media.

"Our members are also facing considerable recruitment and retention challenges across the NHS and there is a risk that the assumptions around pay may not be deliverable".

She also noted that the short-term outlook would become clearer next week after publication of the draft budget.