Examining the economic outlook out to 2060, the Organisation for
Economic Cooperation and Development said governments will
increasingly have to contend with the costs associated with
aging populations and rising prices for public services.
That is on top of servicing the huge debts left by COVID-19,
which will take decades to repay.
Many of the 38 mostly wealthy countries belonging to the
Paris-based OECD saw their budget deficits blow out to record
levels during the pandemic as they propped up their economies
during lockdowns.
If current historically low interest rates persist, most OECD
countries could afford to cover the extra strain on their
budgets by adding to their debt piles, the report said.
But fiscal pressure on the median OECD country could reach 8
percentage points of GDP by 2060 as governments try to keep
public service standards and benefits at current levels, the
OECD calculated.
The increased strain on public finances was seen highest in
Slovakia at 17%, followed by Poland at 14%, Spain and the Czech
Republic at 13% and France and Japan at 12%.
But a permanent 1 percentage point increase in global interest
rates from current historically low levels would raise fiscal
pressure by as much as 1-1.5% in countries with the most debt,
such as Greece, Italy and Japan, the OECD said.
To ease fiscal pressure there was little countries could do
other than adopt reform packages to boost employment, which
would in turn boost per capita GDP.
That could raise living standards by nearly 7% by 2060 while
those countries with the furthest to go down the path of reform
- identified by the OECD as Belgium, France and Italy - could
see gains of 9-10%.
Such packages would ease fiscal pressure by about 1.75
percentage points of GDP by 2060 in the median OECD country, the
report estimated.
(Reporting by Leigh Thomas; Editing by Catherine Evans)
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