Government debt scenarios

The debt dynamics simulations presented in this document are based on OECD estimates for long-term output growth and expenditures on pensions, health and long-term care. Over the long term, potential real GDP is assumed to increase by 1.5% and the GDP deflator by 2% per year (Johansson et al., 2013). Pension costs mount with ageing (OECD, 2013c). The baseline scenario (No policy action) does not incorporate the impact of the pension reform to be implemented from 2017. Public health and long-term care expenditure projections are based on the cost-containment scenario in De la Maisonneuve and Oliveira Martins (2013), in which the increase in public health and long-term care spending between 2010 and 2060 is contained to about 2.5 percentage points of GDP. Although precise quantification is challenging, such an outcome seems plausible if the social welfare and health care reform is successfully implemented.