G8 commit to fiscal responsibility as research reveals they are the ones most at risk
Low birth rates, ageing populations and inadequate public finances make Italy and Japan the world’s least fiscally sustainable countries, according to a new study.
At the G8 Summit in L'Aquila, Italy, world leaders expressed a commitment to 'medium term fiscal sustainability'. At the same time the study revealed that two G8 members, Italy and Japan, are at the most fiscal risk out of a ranking of 178 countries.
The study highlighted the countries that will come under increasing economic pressure in future years.
A demographic transition towards low birth rates and high life expectancy results in increasingly ageing populations and a diminishing workforce. This in turn creates higher demands for public expenditure coupled with a likely decrease in public revenue.
Governments like Italy and Japan which have high public debts and fiscal deficits plus high spending on pensions and healthcare are thought to be particularly vulnerable.
'Populations in these countries will be negatively affected, either through higher payments towards pension funds, a longer working life or lower benefits,' said Fiona Place, an analyst with Maplecroft, which conducted the research.
Of the other G8 nations Germany (which came 21st) and France (48) are considered high risk, whilst the United Kingdom (63), Russia (78), Canada (100) and USA (135) are rated medium risk.
According to the UN Department of Economic and Social Affairs, the number of persons aged 60 years or over will rise from 10 % of the world population today to 22 % in 2050. Italy’s old-age dependency ratio (population aged 65+) is projected to be 33.3% by 2050, rising from 19.6% in 2005, whilst Japan’s is estimated at 37.8% in 2050 up from 19.9% in 2005.