If G-20 governments do not change their age-related health care spending, their credit ratings could be at risk within the next decade, claims a recent report by Standard and Poor’s.
With growing elder population, increased age-related spending, ballooning national debt and no reform, the downgrades would begin as soon as 2015 and “would include a number of highly rated sovereigns.” When the full impact of ageing population kicks in around 2020, “the projected downward transition in sovereign ratings would then dominate along [the] entire rating scale.”
While pensions remain a concern, health care spending will be claiming larger percentages of the countries’ GDPs over time. S&P demonstrated three scenarios in the report:
- ratings if there are no changes in policy
- alternate scenario one with ratings if there are age-related spending reforms without health care reform
- alternate scenario two with ratings if there are balanced budgets and age-related spending reforms without health care reform
According to S&P, emerging market sovereigns, such as those in Southeast Asia, have more favourable demographic dynamics and economic growth, which means their budgetary challenges are less pressing and provide them with time to consider their option regarding their policies.