World Faces Fiscal Problems Much Worse Than Those From Covid, OECD Warns




 

(Bloomberg) --

Most Read from Bloomberg

  • Google's Biggest Moonshot Is Its Search for a Carbon-Free Future

  • A $30 Billion Fortune Is Hiding in China's Silicon Valley

  • The Biggest Public Graveyard in the U.S. Is Becoming a Park

  • Google's CEO: 'We're Losing Time' in the Climate Fight

  • Hate-Speech Case Forces Japan to Confront Workplace Racism

The Covid-19 pandemic may have bloated public debt to levels already pushing some governments to consider consolidation, but that's nothing compared to the fiscal difficulties brewing in the coming decades, the OECD said.

According to its long-term scenario, a deceleration in large emerging economies, demographic change and slowing productivity gains will drag trend economic growth among the OECD's 38 members and the Group-of-20 nations to 1.5% in 2060 from around 3% currently. At the same time, states will face rising costs, particular from pensions and health care.

To maintain public services and benefits while stabilizing debt in that environment, governments would have to raise revenues by nearly 8% of gross domestic product, the OECD said. In some countries, including France and Japan, the size of the challenge would amount to more than 10% of output, and the economists didn't even account for new expenditures such as climate change adaptation.

"Secular trends such as population aging and the rising relative price of services will keep adding pressure on government budgets," the OECD said in the policy paper prepared by Yvan Guillemette and David Turner. "Fiscal pressure from these long-run trends dwarf that associated with servicing Covid-legacy public debt."

Countries need not necessarily raise taxes to meet these challenges, the OECD said. Instead, it called for reforms to boost employment rates and raise retirement ages.

A combination of action in those two areas -- including ensuring effective retirement ages rise by two thirds of future gains in life expectancy -- could halve the projected increase in fiscal pressure by 2060 in the median country, according to the organization.

Most Read from Bloomberg Businessweek

  • How Donald Trump, Elon Musk, and Gwyneth Paltrow Short-Circuit Your Ability to Think Rationally

  • What My Brain Scan Revealed About the Science of Persuasion

  • These Out-of-Work Americans Tell Us Job Market Turmoil Is Anything But Transitory

  • Homeopathy Doesn't Work. So Why Do So Many Germans Believe in It?

  • MLB Is Testing Ways to Fix Baseball's Boredom Problem

©2021 Bloomberg L.P.

COMMENTS

More Related News

Bonds From India, Philippines Most at Risk Amid Variant Threat
Bonds From India, Philippines Most at Risk Amid Variant Threat

(Bloomberg) -- Bonds from India and the Philippines look to be most vulnerable to further economic slowdowns in Asia as the threat from a new coronavirus...

U.S. Stocks
U.S. Stocks' Wall of Worry Rises Far Beyond the Omicron Variant

(Bloomberg) -- Investors are worrying about a lot more than just the omicron variant, if recent market moves are anything to go by.Most Read from...

Oil Skittish Near Three-Month Low Ahead of OPEC+ Supply Meeting
Oil Skittish Near Three-Month Low Ahead of OPEC+ Supply Meeting

(Bloomberg) -- Oil clawed back some losses after plunging more than 6% over the previous two sessions on nervousness the rapid spread of the omicron virus...

JPMorgan Says Buy the Dip as Omicron May Signal Pandemic Ending
JPMorgan Says Buy the Dip as Omicron May Signal Pandemic Ending

(Bloomberg) -- The recent market turmoil caused by the emergence of the omicron virus strain may offer investors a chance to position for a trend reversal in...

Erdogan Replaces Finance Minister as Rate Cuts Deepen Rifts
Erdogan Replaces Finance Minister as Rate Cuts Deepen Rifts

(Bloomberg) -- Turkey's President Recep Tayyip Erdogan abruptly replaced his finance minister amid deepening rifts in the administration over aggressive...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy