EUROPE - Estonia, Poland and Latvia were warned not to rest on their laurels just yet regarding pension expenditure since projections by the EU Commission could turn out to be less favourable than has been assumed.
In its convergence report for December 2006, the European Central Bank (ECB) highlighted the countries that would experience increases or declines in age-related expenditure in the years to 2050.
The ECB said according to the latest projections by the EU’s economic policy committee and the EU Commission, Estonia, Poland and Latvia would all experience declines in pension expenditure.
However, the bank said continued vigilance will be needed since the actual demographic economic and financial developments could turn out to be less favourable than projections assumed.
The decreases in expenditure were partly attributed to pension reforms undertaken in each country.
Expenditure in Sweden and Slovakia on the other hand was forecast to increase moderately, but the ECB claimed this could also diverge from the projections.
Malta’s age-related expenditure was also predicted to increase until 2020 but should decrease in the following years due to the national pension arrangements.
However, the country was also warned by the ECB to exercise vigilance as this could change considering a marked ageing of the population is expected.
Hungary was the one country the ECB declared would definitely see a substantial increase in expenditure amounting to 7% of GDP.
The structural pension reforms were not sufficient to avoid this situation and the burden can only be coped with if room for manoeuvre is created in public finances, the ECB concluded.
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