ECONOMIC GROWTH AND FISCAL SUSTAINABILITY IN THE EU: THE IMPACT OF AN AGEING POPULATION

This paper presents an assessment of the budgetary impact of ageing for the EU Member States. It draws upon the macroeconomic assumptions developed jointly by the Ageing Working Group of the Economic Policy Committee and the European Commission-Directorate General for Economic and Financial Affairs for the purpose of making age-related expenditure projections. The paper presents and analyses projections of the impact of ageing populations on the main age-related public expenditure items. The projections are not forecasts, but nonetheless provide an indication of the potential timing and scale of budgetary changes that could result from ageing populations in a no-policy change scenario. The projections show where, (in which countries), when and to what extent ageing pressures will accelerate as the baby-boom generation retires. In doing so, the projections are helpful in highlighting the immediate and future challenges for governments posed by demographic trends. The projections point to pressing economic policy challenges for the EU. From an economic perspective, potential growth rates are projected to fall to levels below those observed in recent decades. Fiscal challenges will come from a higher share of the total population in older age cohorts and a decline in the share of the population that is economically active. The fiscal impac