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Fiscal sustainability under the conditions of emerging longevity economy

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  • Stepanova O.

Abstract

The article investigates the influence of the growing public expenditures on health caused by the demographic aging of the population, on the stability of public finances in the context of the establishment of the "longevity economy". The author conducts a scenario based assessment of the sustainability of public finances in Ukraine in the medium and long term, based on the calculation of the fiscal gap indicator. In particular, investigated the "stress effect" of the changes in the indicators of macroeconomic development and the fiscal position on the sustainability of public finances under the condition of realization of the historical scenario. The author proves a significant influence of demographic aging of Ukraine's population on the sustainability of public finance. It is determined that in the long term there will be a fundamental transformation of the "spending profile" in the health care by sex-age groups, which, for example, is due to a shift in consumption of these expenditures by the population of older age groups and their increased share. The author substantiates the necessity to expand the fiscal space for fulfilling the normative requirements of the Ukrainian legislation on health financing based on the calculation of the necessary structural primary balance to overcome the fiscal gap, which is proposed to be used as one of the benchmarks for the implementation of fiscal policy in order to attain medium and long-term sustainability of public finances for a given period of fiscal adjustment. It is proposed: to monitor and control the pace and the growth factors of health care expenditures in the medium and long-term; to develop indicators for assessing the fiscal space for healthcare with due regard to potential change in the demographic structure of the population; to assess the transformation of the fiscal space to finance the health care in the context of the establishment of the longevity economy while respecting the sustainability of the system of public finances.

Suggested Citation

  • Stepanova O., 2019. "Fiscal sustainability under the conditions of emerging longevity economy," Economy and Forecasting, Valeriy Heyets, issue 1, pages 35-50.
    • Handle: RePEc:eip:journl:y:2019:i:1:p:35-50
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