The sustainability of public finances in the context of population ageing

In virtually every country in the world, populations are growing considerably older, a development known as ageing. That process is farthest advanced in the industrialised countries. In Belgium, too, the population is ageing and that will continue in the coming decades owing to expansion of the older population and a temporary decline in the population of working age. These demographic developments have a huge impact on society. For instance, economic growth slows down owing to the temporary decline in the population of working age. In addition, there is a strong upward pressure on public expenditure relating to pensions, health care and care of the elderly as a result of the steep rise in the number of pensioners. This demographic change therefore brings serious social and economic challenges, including in the sphere of public finances. The article describes these challenges and investigates how the government can respond, including via an appropriate fiscal policy, an economic policy that encourages growth, and reforms in the sphere of pensions and health care, in order to maintain sound public finances in the long term.