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Long-term sustainability of public finances and the costs of ageing population

Containing the sustainability of public finances is one of the key objectives of the EU Member States. Reliable and comparable data on possible changes in general government commitments and fiscal sustainability are required to achieve the objectives. The European Commission (EC) prepares the ageing report every three years in cooperation with the Ageing Working Group (AWG) at the Economic Policy Committee (EPC), which contains long-term projections of age-related public expenditures on:

• pensions,
• health,
• long-term care,
• education,
• and unemployment benefits.

In the year 2015 new projections for the period up to 2060, based on previously adopted methodological assumptions were published. These projections represent important factor for determination of medium-term fiscal objective (MTO) and are the basis of a comprehensive assessment of the European Commission on the long-term sustainability of  public finances for each individual country.

On the basis of new projections on expenditure levels for the period up to 2060 it is expected that expenditure on ageing population in Slovenia will increase from the current 24.7% to 31.5% of GDP. Thus, according to the projections the ongoing process of ageing population will be more intense in Slovenia than in other EU countries. In the share of GDP Slovenia is at the very top (Norway, Finland and Belgium have higher levels). Regarding the structure of age-related public expenditures, the largest share of expenses relates to the pension system. Because of the rapid growth of pensions expenditure, Slovenia will be the most exposed country until the year 2047; so it will experience the highest increase of pensions expenditure among all EU countries in the period 2013 - 2060. The main reason for that is the rapid increase in the number of elderly people and on the other side the shrinking of the active population, thus the ratio between employed insured persons and pensioners will continue to decrease.

The preparation of long-term projections for Slovenia are managed and coordinated at the Ministry of Finance through the inter-institutional working group which is in charge of preparation the projections on age-related public expenditures. The main tasks of the working group are:
• preparation and discussion on methodological materials and data within the working framework of the Ageing Working Group (AWG) in cooperation with the Economic Policy Committee (EPC); which is what Slovenia transmits to the European Commission;
• preparation of long-term projections of pension expenditure and coordinating the development of databases for projections of public expenditure on health, long term care, education and unemployment benefits;
• notifying line ministries and the competent authorities about the results of long-term projections of all public expenditures associated with aging population.

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The 2012 Ageing Report:
Methodological assumptions, 2012: