Aging Population Might Cause Debt Problems in the Future for Austria

Every three years, the Ministry of Finance prepares a long-term budget prognosis for the next 30 to 40 years. Most of the time, a constant decline in relative debt measured in the percentage of gross domestic product is predicted. At least that was the case in 2016 and 2019 when government debt was expected to slowly creep towards 50 or 65 percent of GDP. However, the prognosis looks different this time, according to Die Presse. Without reforms, the national debt will start to rise sharply again in just a few years, according to the Ministry of Finance's most recent long-term budget prognosis. The main reason for this is the aging of the population, as Die Presse reported it.

According to the prognosis, which is stated in the ORF, in just under forty years more than sixty-two percent of total government spending will be spent on pensions, care, health, and education. "The fiscal prognosis shows that the Maastricht balance will deteriorate continuously from 2027 and will exceed the Maastricht control limit of three percent of GDP in 2033," says the most recent forecast, which was drawn up shortly before Christmas.

The budget deficit, which is increasing structurally, then also has a clear impact on the national debt: “In 2028, i.e. relatively early in the forecast period, the debt ratio is already at its lowest point at 72.6 percent of GDP, and then rises to 81.8 percent by 2040. to 99.6 percent of GDP by 2050 and 120.8 percent by 2060.”, as it is further stated in the ORF.

The Ministry of Finance points out that the assumptions in the prognosis were made as if the current policy would continue unchanged. The forecast thus provides "a projection of the status quo" and serves "as an early warning system" for necessary reforms. The results "make it clear that demographic change in Austria will be a central budgetary and social policy challenge in the coming years and decades", according to Die Presse.